Chapter 1- Introduction to Corporate Finance

Which of the following actions would be considered an agency problem?

A shareholder in a corporation sells shares of the company's stock when the price rises

Which one of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the company's equity

The controller, rather than the treasurer, is typically responsible for which one of the following functions?

Processing cost reports

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

Should the firm require immediate payment from customers or offer credit terms?

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

corporation

Which one of the following is an unintended result of the Sarbanes-Oxley Act?

corporations delisting from major exchanges

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

A sole proprietorship:

has a limited life

Which one of the following would cause a cash outflow from a corporation?

paying dividends

Which one of the following grants an individual the right to vote on behalf of a shareholder?

proxy

A sole proprietorship:

requires the owner to be personally responsible for all of the company's debts.

Which of the following actions would be most likely to decrease agency costs for the firm?

reward high performing employees with shares of stock

Which one of the following is a primary market transaction?

sale of a new share of stock from a corporation to an individual investor

Financial managers should primarily focus on the interests of:

shareholders

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

sole proprietorship