exam 1, chapter 1: smartbook questions

Why don't large businesses organize as sole proprietorships or partnerships? Multiple choice question. It is too easy to transfer ownership from one party to another. Businesses want to maximize their liability. It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow. These forms of business organization are too complicated to manage on a large scale.

It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow.

According to Figure 1.2, where does cash generated by a corporation typically go? Multiple select question. reinvested in the firm to buy financial assets paid to shareholders and creditors to pay corporate taxes

To pay corporate taxes Reinvested in the firm Paid to shareholders and creditors

When one owner or creditor sells to another, the transaction takes place in the Blank______ market. Multiple choice question. underwriting secondary rudimentary primary

secondary

The owners of a corporation are called Blank______. Multiple choice question. partners shareholders bondholders government agents

shareholders

Working capital includes which of the following? Multiple select question. equipment short-term assets inventory cash

short-term assets inventory cash

The goal of the financial management is to increase the value of Blank______. Multiple choice question. future profits their total compensation package. current earnings the existing shares of the stock

the existing shares of the stock

What is the primary objective of an auction market? Multiple choice question. to bring buyers and sellers together to set prices for assets for sale to earn commissions on sales

to bring buyers and sellers together

What is the main goal of financial management? Multiple choice question. to maximize expenses to make sure that the managers hold the majority of the shares in the company to maximize the current share value to raise as much capital as possible

to maximize the current share value

Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of Blank______ management. Multiple choice question. fixed asset accounts receivables working capital total asset

working capital

A partnership must have at least Blank______ owners. Multiple choice question. two ten four three

2

True or false: In a large corporation, stockholders and managers are usually separate groups. True false question.TrueFalse

true

A sole proprietor has _____ personal liability for all business debts and obligations. Multiple choice question. limited unlimited no little

unlimited

How does the Sarbanes-Oxley Act primarily work to make sure that companies tell the truth in financial statements? Multiple choice question. It has government auditors review all financial statements for potential errors or omissions. It makes management personally responsible for the accuracy of a company's financial statements. It levies hefty fines for errors.

It makes management personally responsible for the accuracy of a company's financial statements.

True or false: "Profit maximization" is the goal for the management of a corporation in the short run only.

false

True or false: The Sarbanes-Oxley Act provides incentives for companies to go public in U.S. markets. True false question.TrueFalse

false

A business without separate legal authority formed by two or more people is known as a Blank______. Multiple choice question. conglomerate corporation partnership sole proprietorship

partnership

Which of the following is not one of the basic areas of finance? Multiple choice question. international finance corporate finance personal finance financial institutions investments

personal finance

An organization must prepare Blank______ and bylaws when forming a corporation. Multiple choice question. articles of incorporation a legal will an indenture agreement a partnership agreement

articles of incorporation

The New York Stock Exchange is a(n) Blank______. Multiple choice question. auction market primary market dealers market

auction market

Corporations in other countries are often called: Multiple select question. limited liability companies joint stock companies public limited companies autonomous entities re-calibrated partnerships

limited liability companies joint stock companies public limited companies

What type of partnership involves both general and limited partners to run the business? Multiple choice question. corporation general partnership limited partnership sole proprietorship

limited partnership

In a limited partnership, a limited partner's liability for business debts is Blank______. Multiple choice question. unlimited limited by their average annual income over the life of the partnership $0 limited to their cash contribution to the partnership

limited to their cash contribution to the partnership

Since Blank______ and ownership are separated, a corporation's life is unlimited. Multiple choice question. taxation management profitability debt

management

Which of these have been noted as unintended consequences of the Sarbanes-Oxley Act? Multiple select question. public firms "going dark" and leaving the stock market eliminating public disclosure for many firms more accurate financial disclosures firms going public outside of the U.S. market

firms going public outside of the U.S. market eliminating public disclosure for many firms public firms "going dark" and leaving the stock market

When a corporation is formed, it is granted which of the following rights? Multiple select question. legal powers to sue citizenship for casting vote in presidential election of the country the ability to issue stock corporate life of up to 100 years

legal powers to sue the ability to issue stock

The five basic areas of finance include investments, financial institutions, fintech, international finance, and _____ finance.

Corporate

Public limited companies and joint stock companies are other names for Blank______. Multiple choice question. partnerships companies corporations proprietorships

Corporations

Which of the following are reasons that the corporation is the most important form of business? Multiple select question. Corporations can vote in general elections. Corporations can enter contracts. Corporations are separate legal entities. Corporations can sue and be sued.

Corporations can enter contracts. Corporations are separate legal entities. Corporations can sue and be sued.

Is profit maximization the primary objective of a business? Multiple choice question. No; profit maximization may not take into account other strategic objectives necessary to maximize shareholder value. It depends; sometimes profit maximization is the most important objective, and sometimes it isn't. Yes; the entire point of running a business is to make as much money as possible for everyone involved.

No; profit maximization may not take into account other strategic objectives necessary to maximize shareholder value.

One of the important questions in the area of investments includes the potential risks and reward associated with investing in ______ assets.

financial

The Sarbanes-Oxley Act requires corporate officers to: Multiple select question. personally prepare all financial statements. confirm the validity of the financial statements. limit their compensation and stock options. be responsible for errors in the annual report.

be responsible for errors in the annual report. confirm the validity of the financial statements.

Which of the following is a disadvantage of sole proprietorships and partnerships? Multiple choice question. difficulty of transferring ownership double taxation unlimited life of the business separation of ownership and management

difficulty of transferring ownership

Which of the following are defining features of the primary market? Multiple select question. Proceeds from the sale of securities go to the issuing firm. It only involves seasoned equity offerings. It is the market where initial public offerings are made. It is the market where shareholders and bondholders buy and sell to each other.

Proceeds from the sale of securities go to the issuing firm. it is the market where initial public offerings are made.

Which of the following are key questions for investments? Multiple select question. What determines the price of a financial asset? How much money should you have to open a portfolio? What are the risks and rewards associated with investing? What are stocks? What is the best mixture of financial assets to hold?

What determines the price of a financial asset? What are the risks and rewards associated with investing? What is the best mixture of financial assets to hold?

A corporation receives cash from financial markets by selling Blank______ and Blank______. Multiple select question. land finished goods stocks bonds

stocks bonds

A shareholder's liability is limited to which of these? Multiple choice question. the corporation's current liabilities the corporation's outstanding long-term debt the amount the shareholder invested in the corporation the percentage of corporate debt that equals the shareholder's ownership percentage

the amount the shareholder invested in the corporation

Which of the following are true of a sole proprietorship? Multiple select question. It is one of the simplest types of businesses to form. A sole proprietor can issue stock to raise capital. A proprietorship has a limited life. The owner has limited liability for business debts.

It is one of the simplest types of businesses to form. A proprietorship has a limited life.