LS Ch. 1

a good financial decision will do what two thing?

1. increase market value of stockholders' equity 2. increase the value of the firm's existing stock

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller? a. Cost accounting b. Cash management c. Data processing d. Tax management e. Financial accounting

b. Cash management

Which one of the following functions is generally a responsibility assigned to the corporate treasurer? a. Cost accounting b. Financial accounting c. Capital expenditures d. Corporate taxes e. Data processing

c. Capital expenditures

a corporation is a distinct _____ entity and as such can have a name and take advantage of the legal powers of natural persons. a. retributive b. illegal c. legal d. patriotic

c. legal

the potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict? a. territorial b. structural c. formative d. agency

d. agency

what 3 questions are the financial manager concerned with? a. working capital management b. capital structure c. designing new products d. capital budgeting

A B and D working capital management capital structure capital budgeting

which of the following are true of a sole proprietorship? a. a proprietorship has a limited life b. it is one of the simplest types of businesses to form c. it is not difficult to transfer ownership d. a sole proprietor can issue stock to raise capital

A and B a. a proprietorship has a limited life b. it is one of the simplest types of businesses to form

which one of these is an important mechanism used by unhappy stockholders to replace current management? a. proxy fight b. perpetual debt c. ponzi scheme d. prospectus

a, proxy fight (an illegal business that pays out "earnings" by selling more investments)

the threat of _____ motivates managers to make good decisions a. a hostile takeover b. retribution c. customer complaints d. emails

a. a hostile takeover (a hostile takeover usually results in the ouster of top management from the acquired company)

the costs incurred due to a conflict of interest between stockholders and management are called _____. a. agency costs b. opportunity costs c. sunk costs d. hidden costs

a. agency costs

In a shareholder-manager relationship, who is the agent? a. managers b. shareholders c. neither shareholders nor managers d. both shareholders and managers

a. managers

how is ownership transferred in a corporation? a. ownership is transferred by gifting or selling shares of stock b. ownership in a corporation cannot be transferred c. ownership can be transferred only if the firm is sold d. ownership is transferred only with prior approval from the board of directors

a. ownership is transferred by gifting or selling shares of stock

a(n) _______ is someone other than an owner or a creditor who potentially has a claim on the cash flows of the firm. a. stakeholder b. bondholder c. shareholder d. autocrat

a. stakeholder

which corporate officer is responsible for managing the firm's cash? a. treasurer b. controller c. cost accounting manager d. sales manager

a. treasurer

if you hire a real estate company to sell your house, you are most apt to encounter which of the following? a. securities exchange act of 1934 violation b. securities act of 1933 violation c. agency problem d. capital structure problem

agency problem

jamie is employed as a currency trader in the japanese yen market. her job falls into which of the following areas of finance? a. capital management b. corporate finance c. financial institutions d. personal finance e. international finance

e. international finance

if you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which of the following financial areas? a. corporate finance b. capital management c. international finance d. private placements e. investments

e. investments

The primary goal of financial management is most associated with increasing the: a. firm's liquidity. b. traffic flow within the firm's stores. c. the fixed costs while lowering the variable costs. d. dollar amount of each sale. e. market value of the firm.

e. market value of the firm.

an agency issue is most apt to develop when: a. the firm's owner is also its key manager b. a firm downsizes c. a firm encounters a period of stagnant growth d. a firm is structured as a general partnership e. the control of a firm is separated from the firm's ownership

e. the control of a firm is separated from the firm's ownership

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as: a. fixed account structure. b. capital structure decisions. c. operating management. d. capital budgeting decisions. e. working capital management.

e. working capital management.

T/F: the sarbanes oxley act provides incentives for companies to go public in us markets

false (due to cost and regulation of sarbanes-oxley, many companies turn to foreign markets to go public)

T/F: "Profit maximization" is the best goal for the management of a corporation

false (it is too imprecise. maximizing short-run profit will not increase value for stakeholders)

businesses are motivated to organize as corporations because stockholders in a corporation have _____ liability for corporate debts

limited

the owners of a corporation are called ______.

shareholders

a corporation receives cash from financing markets by selling ____ and _____.

stocks, bonds

in an over-the-counter market, which of the following is true? a. participants are dealers b. only stocks are bought and sold c. participants buy and sell from their own inventory of securities d. an otc market is also called an auction market

A and C a. participants are called dealers c. participants buy and sell from their own inventory of securities

a general partnership has which of the following characteristics a. each owner has unlimited liability for all firm debts b. large amounts of cash can be raised easily c. it is difficult to transfer ownership d. it is expensive to form

A and C a. each owner has unlimited liability for all firm debts c. it is difficult to transfer ownership

which of the following are considered NON-owner stakeholders in a company? a. employees b. stockholders c. suppliers d. government

A, C and D a. employees c. suppliers d. government (although all these are stakeholders, they are not owners)

when a corporation is formed it is granted which of the following rights? a. the ability to issue stock b. legal powers to sue c. corporate life of up to 100 years d. provincial citizenship for jurisdictional purposes

A.B. and D a. the ability to issue stock b. legal powers to sue d. provisional citizenship for jurisdictional purposes

the sarbanes-oxley act requires corporate officers to: a. personally prepare all financial statements b. confirm the validity of the financial statements c. be responsible for errors in the annual report d. limit their compensation and stock options

B and C b. confirm the validity of the financial statements c. be responsible for errors in the annual report

which of the following are defining features of the PRIMARY MARKET? a. it only involves seasoned equity offerings b. it is the market where initial public offerings are made c. proceeds from the sale of securities goes to the issuing firm d. it is the market where shareholders and bondholders buy and sell to each other

B and C b. it is the market where initial public offerings are made c. proceeds from the sale of securities goes to the issuing firm

the controller is responsible for which of the following tasks? a. capital expenditures b. tax reporting and payments c. financial accounting d. raising capital

B and C b. tax reporting and payments c. financial accounting

which of the following are included in a firm's capital structure? a. net sales b. equity c. long term debt d. current assets

B and C equity and long term assets

which of the following are auction markets in the US? a. NASDAQ b. The Chicago Stock Exchange c. The New York Stock Exchange

B and C the chicago stock exchange and the new york stock exchange

which of the following are important when considering a partnership? a. rights of the shareholders b. limited life of the business c. external capital raising limitations d. unlimited liability

B, C, and D b. limited life of the business c. external capital raising limitations d. unlimited liability

Where does cash generated by a corporation typically go? a. to buy financial assets b. paid to shareholders and creditors c. to pay corporate taxes d. reinvested in the firm

B., C., and D b. paid to shareholders and creditors c. to pay corporate taxes d. reinvested in the firm

the relationship between stockholders and management can best be described as a _______ relationship. a. mentoring b. agency c. irrelevant d. contradictory

b. agency

uptown markets is financed with 45 percent debt and 55 percent equity. this mixture of debt and equity is referred to as the firm's a. asset allocation b. capital structure c. working capital d. risk structure e. capital budget

b. capital structure

Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge of: a. asset allocation. b. capital structure management. c. risk management. d. capital budgeting. e. working capital management.

b. capital structure management.

in large firms, financial activity is usually associated with which top officer? a. vice president of production b. chief financial officer c. chief management consultant d. vice president for marketing

b. chief financial officer

which of the following occupations best fits into the corporate area of finance? a. mortgage broker b. chief financial officer c. insurance risk manager d. local bank manager e. treasury bill analyst

b. chief financial officer

which of the following companies were involved in corporate scandals that led to sarbanes-oxley? a. disney b. enron c. tyco d. worldcom

b. enron c. tyco d. worldcom

which of the following area of finance is concerned with asset allocation? a. corporate finance b. investments c. financial institutions

b. investments

a sole proprietorship is a business that ______: a. is similar to a limited partnership b. is owned by one person c. is organized with bylaws d. provides limited liability to its owner

b. is owned by one person

in a limited partnership, a limited partner's liability for business debts is __________. a. limited by their average annual income over the life of the partnership b. limited to their cash contribution to the partnership c. unlimited d. $0

b. limited to their cash contribution to the partnership

capital budgeting is concerned with making and managing expenditures on _____ a. current assets b. long term assets c. current liabilities d. long term liabilities

b. long term assets

the goal of a "for profit" business is to ____ the value of shareholder wealth. a. maintain b. maximize c. recognize d. minimize

b. maximize

corporations in other countries are often called: a. autonomous entities b. public limited companies c. re-calibrated partnerships d. limited liability company e. joint stock companies

b. public limited companies d. limited liability company e. joint stock companies

In a shareholder-manager relationship, who is the principal? a. managers b. shareholders c. neither shareholders nor managers d. both shareholders and managers

b. shareholders

_____ _____ can be used to encourage managers to maximize the value of the stock. a. green mail b. stock options c. stock splits d. poison pills

b. stock options

ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes from the heading of ______ management a. total asset b. working capital c. cash balance d. accounce receivables

b. working capital

Which one of the following applies to a general partnership? a. The profits of the firm are taxed as a separate entity. b. The profits of a general partnership are taxed the same as those of a corporation. c. The firm's operations must be controlled by a single partner. d. Any one of the partners can be held solely liable for all of the partnership's debt. e. Each partner's liability for the firm's debts is limited to each partner's investment in the firm.

d. Any one of the partners can be held solely liable for all of the partnership's debt.

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts? a. Corporation b. Limited partnership c. General partnership d. Sole proprietorship e. Joint stock company

d. Sole proprietorship

the federal government taxes which of the following? a. neither corporate earnings nor shareholder dividends b. shareholder dividends but not corporate earnings c. corporate earnings but not shareholder dividends d. corporate earnings and shareholder dividends

d. corporate earnings and shareholder dividends

According to the textbook, which of the following is NOT one of the three main questions to be addressed if you wanted to start your own business? a. what long term investments should be made? b. where will long-term financing be obtained to pay for investments? c. how will everyday financial activities be handles? d. how many employees do i need?

d. how many employees will i need?

a corporation: a. is prohibited from entering into contractual agreements b. has its identity defined by its bylaws c. has its existence regulated by the rules set forth in its charter d. is a legal entity separate for its owners .e. is ultimately controlled by its board of directors

d. is a legal entity separate from its owners

the primary goal of financial management is to maximize: a. market share. b. current profits. c. revenue growth. d. the market value of existing stock. e. current dividends.

d. the market value of existing stock.

what is the main goal of financial management? a. to minimize expenses b. to maximize market share c. to maximize current profits d. to maximize current share value

d. to maximize current share valye