FIn 220 Quiz 1

The shareholder of Lawrence Food Inc. would benefit if the firm were to be acquired by Better Food Inc. However, Lawrence Foods reflects the offer, this is an example of

Agency Conflict/Problem - Conflict of interest between principal and agent

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency Problem

Uptown markets are financed with 45% debt and 55% equity. This mixture of debt and equity is referred to as the firms

Capital Structure - Determines how to use debt or equity and how to pay for assets

Which of the following occupations best fits the area of corporate finance?

Chief Financial Officer (CFO) - top financial manager within a firm

Which of the following statements is correct?

Dealer market

One disadvantage of the corporate form of business ownership is

Double Taxation - Double taxation (income taxed at the corporate rate and then dividends taxed at the personal rate)

Which of the following is a working capital management decision?

Inventory - Manages short-term assets and liabilities. - how much inventory should the firm carry? - What credit policy is best?

An example of capital budgeting

New Machine - Deciding what long-term investments or projects should the business take on.

The goal of financial management is to maximize

the current share value of existing stocks.