Business Finance Chapter 1

Corporate bylaws

Determine how a corporation regulates itself

In a typical corporate organizational structure:

The controller reports to the chief financial officer

Which one of the following involves a working capital management decision?

What is the maximum level of cash to be kept in the firm's bank account

A partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

limited

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a

General Partnership

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

A firm owned by a single person who has unlimited liability for the firm's debt is called a:

Sole proprietorship

______ are personally responsible for 100 percent of the firm's debts.

Both general partners and sole proprietors

Determining the number of shares of stock to issue is an example of a ______ decision.

Capital Structure

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Corporation

The articles of incorporation:

Describe the purpose of the firm and set forth the number of shares of stock that can be issued

Which one of the following is a disadvantage of the corporate form of business?

Distributed profits may experience double taxation

The Sarbones-Oxley Act of 2002 holds a public company's ____ responsible for the accuracy of the company's financial statements

Managers

Decisions made by financial managers should primarily focus on increasing the:

Market value per share of outstanding stock

Public offerings of debt and equity must be registered with the:

Securities and exchange commission

Financial managers should primarily focus on the interests of:

Shareholders

Ultimately, the ______ control(s) the corporation.

Shareholders

Which one of the following questions involves a capital budgeting decision?

Should the firm purchase a new machine for the production line