FIN330 HW 1 Chp 1

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How can you tell if a cell is graded?

Cell corner is green.

A sole proprietorship:

has its profits taxed as personal income.

A corporation:

is a legal entity separate from its owners.

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation.

In a general partnership, each partner in personally liable for:

the total debts of the partnership, even if he or she was unaware of those debts.

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

Agency problem

Jordan and Carmen created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

Corporation

Which of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Increase the protections against corporate fraud.

Which of the following is an advantage of being a limited partner?

Losses limited to capital invested.

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity.

Vera opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Vera own if she is personally liable for all the store's debts?

Sole proprietorship

The primary goal of financial management is to maximize:

the market value of existing stock.

The shareholders of Qiang's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.


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