Chapter 1 Learn
Which of the following are among the most important questions to be asked when a business is started?
- How will everyday financial activities be handled? - Where will long-term financing be obtained to pay for investments? - What long-term investments should be made?
The possible goal of profit maximization:
-can be achieved by cost-cutting -would probably be the most commonly sighted goal for a business
Corporations in other countries are often called:
-joint stock companies -public limited companies
A sole proprietorship is a business owned by ______ person(s).
1
If you hire a real estate company to sell your house, you are most apt to encounter which one of the following?
Agency problem
Which of the following can be used to encourage managers to act in the best interests of shareholders?
Better prospects of promotion Managerial compensation tied to performance
______ budgeting is the process of making and managing expenditures on long-term assets.
Capital
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
Which of the following positions generally report to the chief financial officer (CFO)?
Controller Treasurer
Which of the following show why a corporation is the most important form of business?
Corporations can sue and be sued. Corporations can enter into contracts. A corporation is a separate legal entity with the ability to acquire and exchange property.
Finance is only important to study if you are planning a career in finance.
False
It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control.
False
True or false: Ownership in the corporate form is difficult to transfer.
False
What are the two factors that impact whether managers will act in the best interest of stockholders?
How closely management goals align with stockholder goals and the way managers are compensated
When a corporation is formed, it is granted which of the following rights?
Legal powers to sue The ability to issue stock State citizenship for jurisdictional purposes
Which of the following, according to the textbook, are possible financial goals for a company?
Maximize profits Survival Minimize costs
Organized auction markets include:
New York Stock Exchange
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling shares of stock
A business without separate legal authority formed by two or more people is known as a _____.
Partnership
The aim of the act known as Blank______ is to protect investors from corporate abuse.
SOX
The aim of the act known as ______ is to protect investors from corporate abuse.
SOX
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
Which of the following are considered stakeholders in a company?
Suppliers Employees Government
Which of the following is not an important question that must be asked when starting a firm?
Which type of operating system should you use for your computers?
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley?
WorldCom Enron Tyco
The relationship between stockholders and management can best be described as a(n) ______ relationship.
agency
A _____ corporation is for profit, and has the legal attributes of accountability, transparency, and purpose.
benefit
It is argued that, left to themselves, managers would tend to maximize the amount of resources over which they have control or, more generally, _____ power or wealth.
corporate
Joint stock company is another name for what is referred to as a ________ in the United States.
corporation
The ________ is the most important form, in terms of size, of business organization in the United States.
corporation
Some of the cash flow generated by a firm goes back to the financial markets in the form of ______.
dividends and debt payments
In financial markets, debt and _____ securities are bought and sold.
equity
The five main areas of finance are corporate finance, investments, financial institutions, international finance, and ______.
fintech
The five main areas of finance are corporate finance, _____, financial institutions, international finance, and fintech.
investments
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
Capital budgeting is concerned with planning and managing a firm's _____.
long term investments
Because ownership in a corporate is spread over a huge number of shareholders, it can be argued that ______ effectively controls the firm.
management
Since ________ and ownership are separated, a corporation's life is unlimited.
management
Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm.
management
The goal of a for-profit business is to Blank______ existing owners' equity.
maximize
What is the main goal of financial management?
maximize the current value per share of the existing stock
Most equity shares of large firms in the U.S. trade on:
organized auction markets
The goal of the for-profit business is to maximize _____ equity.
owner's
A ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm.
stakeholder
The owners of a corporation are called ______.
stockholders
In a corporation, the stockholders elect _____, who then select the managers.
the board of directors
The financial manager acts in the shareholders' best interests by making decisions that increase the value of _____.
the stock
A benefit corporation is for profit, and has the legal attributes of accountability, _____, and purpose.
transparency
A partnership must have at least _______ owners.
two
