Financial Markets - Introduction to Financial Management

The possibility of conflict of interest between the owners and management of a firm.

Agency Problem

Financial structure refers to ________________.

All the financial resources.

Returns on this type of investment are characterized by interest and maturity payments.

Bonds

The time value of money relating to cash flows can aid financial managers in making management decisions particularly on certain projects is closely applicable to:

Capital budgeting

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

Chief financial officer

Overseas taxes, cost accounting, financial accounting, and data processing.

Controller

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

Matt and Alicia 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

This form of business organization's advantage is that the money as a form of capital is easier to raise:

Corporation

is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

Financial management

It focuses more on the interaction between multiple countries instead of focusing on one particular market.

International finance

Basic objective of Financial Management is ________________.

Maximization of share holder's

Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

Profit maximization is concerned more with maximizing net income than the stock price.

______________ is the most appropriate goal of the firm.

Shareholder wealth maximization

An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a claim by one of the firm's:

Stakeholders

Any one of the partners can be held solely liable for all of the partnership's debt. a. Partnership b. corporation c. limited liability partnership d. Sole proprietorship

a. Partnership

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's: a. capital structure. b. capital budget. c. asset allocation. d. risk structure. e. working capital.

a. capital structure.

An auction market:

has a physical trading floor

The market price of a share of common stock is determined by the

individuals buying and selling the stock.

The decision function of financial management can be broken down into these different types of decisions.

investment, financing, and asset management

The primary goal of financial management is most associated with increasing the:

market value of the firm.

The long-run objective of financial management is to:

maximize the value of the firm's common stock.

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation.

The focal point of financial management in a firm is:

the creation of value for shareholders.

Shareholder wealth" in a firm is represented by

the market price per share of the firm's common stock.

The primary goal of financial management is to maximize:

the market value of existing stock.

Which of the following overseas cash management, credit management, capital expenditures, and financial planning.

Treasurer

The controller's responsibilities are primarily _______ in nature, while the treasurer's responsibilities are primarily related to ________ .

accounting; financial management

A company's ________ is (are) potentially the most effective instrument of good corporate governance.

board of directors

The shareholders of Weil'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: corporate takeover. a. capital structure issue. b. working capital decision. c. an agency conflict. d. a compensation issue.

c. an agency conflict.

Which one of the following terms is defined as the management of a firm's long-term investments

capital budgeting

The Sarbanes-Oxley Act:

require the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.

This act was passed as a result of one of the most notorious cases in the history of finance. Which one is it?

Enron Scandal

Which one of the following is a capital structure decision?

Establishing the preferred debt-equity level

A(n)______ would be an example of a principal, while a(n) _____ would be an example of an agent.

shareholder; manager

If the financial markets are efficient then:

stock prices should remain constant.

An agency issue is most apt to develop when:

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