CH1

Possible financial goals for a company?

- survive - avoid financial distress and bankruptcy - beat the competition - maximize sales or market share - minimize costs - maximize profits - Maintain steady earnings growth

General Partnership Characteristics

- unlimited liability for both partners (gain/losses and debts) - the way the partnership is divided is described in the partnership agreement - the partnership terminates when a general partner wishes to sell out or dies - ownership of a general partnership is not easily transferred because a transfer requires that a new partner should be formed - all income is taxed as personal income to the partners - the amount of equity that can be raised is limited to be partners combined wealth - a written agreement helps stop the rights and duties of the partners 1: unlimited liability for business tax on the part of the owners 2: limited life of the business 3: difficulty of transferring ownership

A sole proprietorship is a business owned by ______ person(s).

1

Which of the following show why a corporation is the most important form of business? A) A corporation is a separate legal entity with the ability to acquire and exchange property. B) Corporations can enter into contracts. C) Corporations can sue and be sued. D) Corporations can vote in general elections.

A, B, C

When a corporation is formed, it is granted which of the following rights? A) Legal powers to sue B) State citizenship for jurisdictional purposes C) The ability to issue stock D) Corporate life of up to 100 years

A,B,C

In a corporation, the stockholders elect _____, who then select the managers.

Board of directors

Rules describing how the corporation regulates its existence.

Bylaws

In large firms, financial activity is usually associated with which top officer?

CFO

______ budgeting is the process of making and managing expenditures on long-term assets.

Capital

Which of the following positions generally report to the chief financial officer (CFO)? Chief executive officer (CEO) Controller Director of marketing Treasurer

Controller & Treasurer

True or false: Ownership in the corporate form is difficult to transfer.

F Because of separation of ownership and management. Ownership (represented by shares of stock) 10 be readily transferred in the life of the corporation is therefore not limited.

Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm.

Managers/ management

In addition to the importance of finance for marketing, accounting, and management careers, finance is also now considered a Blank______ discipline, especially at the graduate level.

STEM

The liability of a shareholder in a corporation is limited to which of these?

The amount the shareholder invested in the corporation

What is the main goal of financial management?

To maximize current value per share of existing stock, because shareholders provide the capital for the business to be productive.

Which of the following are among the most important questions to be asked when a business is started?

Where will long-term financing be obtained to pay for investments? What long-term investments should be made? What long-term investments should be made?

Forming a corporation involves preparing articles of incorporation and a set of_____.

bylaws

The possible goal of profit maximization:

can be achieved by cost-cutting. would probably be the most commonly cited goal for a business.

The _______ is the most important form, in terms of size, of business organization in the United States.

corporation

In a large corporation, the _____ would be responsible for answering the three main questions that must be asked when starting a firm.

financial manager

In a ________ partnership, all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share.

general

Benefit Corporation (B Corp)

is for profit, and has the legal attributes of accountability, transparency, and purpose.

A sole proprietorship is a business that _______.

is owned by one person.

The life of a corporation ______.

is unlimited

A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons.

legal

Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts.

limited

In a ____ partnership, one or more general partners will run the business and have unlimited liability but there will be one or more _______ partners who will not actively participate in the business. A _______ partner's liability for the business steps is limited to the amount that the partner contributes to the partnership. Ex: Real estate ventures

limited

Capital budgeting is concerned with planning and managing a firm's _____.

long-term investments Planning and managing long-term investments is known as ________. Decisions about current liabilities, long-term liabilities, and shareholders' equity are called capital structure decisions.

A business without separate legal authority formed by two or more people is known as a _____.

partnership

The relative ease of transferring ownership, the limited liability for business debts, and the unlimited life of the business are why the corporate form is superior to sole proprietorships or partnerships for _____.

raising cash

The owners of a corporation are called ______.

stockholders or shareholders

A partnership must have at least _______ owners.

two