FINC 5310 - Financial Management

The relationship between stockholders and management can best be described as a(n) ______ relationship. contradictory irrelevant agency mentoring

agency

A bad financial decision is defined as a decision that ______ owners' equity. increases decreases maximizes does not affect

decreases

True or false: Shareholders are the ONLY stakeholder in a firm as they are the owners. True False

False

Which year was the Sarbanes-Oxley Act enacted? Multiple choice question. 1933 2002 1934

2002

Select all that apply Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley? Disney Enron Tyco WorldCom

Enron Tyco WorldCom

The Securities Act of 1933 and the Securities _______ Act of 1934 provide the basic regulatory framework in the United States for the public trading of securities.

Exchange

What determines when a sale is recorded for accounting purposes? The international monetary fund doctrine Robert's rules of order Generally accepted accounting principles The last-in-fIrst-out principle

Generally accepted accounting principles

The goal of financial management is to (maximize/minimize) shareholder wealth.

maximize

If a shareholder purchases $5,000 of Coca-Cola stock, what is the maximum amount they could lose? $5,000 $1,000 $0 unlimited amount

$5,000

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

The amount the shareholder invested in the corporation.

Select all that apply Which of the following are general ways stockholders control the agency relationship with management. increase firm size compensation replacement

compensation replacement

Which of the following business forms is easiest to transfer ownership stakes in? sole proprietorship partnership corporation

corporation

The main job of a financial manager is to: create value for shareholders appease government agencies make bondholders happy

create value for shareholders

Some of the cash flow generated by a firm goes back to the financial markets in the form of ______. taxes and other payments to the government reinvested cash flows products and services dividends and debt payments.

dividends and debt payments.

Managers who successfully increase shareholder value will be in ______ demand in the labor market. less greater

greater

The 1934 Securities Exchange Act deals with the important issue of ______ trading. outsider government insider day

insider

Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts. limited personal no unlimited

limited

Select all that apply Which of the following are reasons why businesses organize as corporations? Multiple select question. limited liability perpetual succession ease of ownership transfer federal tax treatment

limited liability perpetual succession ease of ownership transfer

Since ________ and ownership are separated, a corporation's life is unlimited. debt management profitability taxation

management

Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm. no one the largest shareholder management the federal government

management

Assuming interest rates are positive and are greater than the inflation rate, one dollar received today is worth _____ one dollar received next year. either more than or less than (but which is uncertain) the same as less than more than

more than

The 1934 Securities Exchange Act restricts anyone who has access to ______ information from trading on that information. public non-public trading redundant

non-public

In many public companies,___________ is dispersed among many shareholders. This dispersion arguably means that management effectively controls the firm.

ownership

Because shareholders get paid last after all other obligations are satisfied, they are often called: creditors preferred shareholders residual owners stakeholders

residual owners

Which of the following are owners of a corporation? bondholders partners shareholders directors

shareholders

Agency costs refer to the costs of the conflict of interest between _______ and _____.

stockholders, management

The primary responsibility of financial managers is to increase the value of _____. future profits their total compensation package. current earnings the existing shares of stock

the existing shares of stock

The primary responsibility of financial managers is to increase the value of _____. the existing shares of stock current earnings future profits their total compensation package.

the existing shares of stock

Select all that apply A good financial decision will do which of the following? Increase the cost of capital Increase market value of shareholders' equity Increase the value of the firm's existing stock Increase current dividends per

Increase market value of shareholders' equity Increase the value of the firm's existing stock

Select all that apply Which of the following can be used to encourage managers to act in the best interests of shareholders? Managerial compensation tied to performance Unreasonably high executive perks A larger organization and more employees Stock options and bonuses

Managerial compensation tied to performance Stock options and bonuses

In a shareholder-manager relationship, who is the agent? Managers Shareholders Both shareholders and managers Neither shareholders nor mana

Managers

Which one of these provides a manager an incentive to perform well? Agency problems Promotions Low pay Lack of takeover

Promotions

Select all that apply Which of the following is true concerning government regulation? Regulation can be costly to a firm. Regulation can help reduce conflicts of interest between managers and shareholders. Regulation generally imposes costs without any benefits. Regulation can help ensure

Regulation can be costly to a firm. Regulation can help reduce conflicts of interest between managers and shareholders. Regulation can help ensure firms disclose relevant information to investors.

When would individuals prefer to receive cash flows? The timing of cash flows does not matter to individuals In equal payments over a long period of time Sooner rather than later Later rather than sooner

Sooner rather than later

______ are frequently used to encourage key managers to maximize the value of the firm's stock. Stock options Stock splits Stock dividends Cash dividends

Stock options

Which of the following groups are considered as owners of a company? Suppliers Customers Stockholder Government

Stockholder

Select all that apply Which of the following, according to the textbook, are possible financial goals for a company? Survival Minimize costs Maximize profits Incur bankruptcy

Survival Minimize costs Maximize profits

Select all that apply When a corporation is formed, it is granted which of the following rights? (Check all that apply.) The ability to issue stock Legal powers to sue Provincial citizenship for jurisdictional purposes Corporate life of up to 100 years

The ability to issue stock Legal powers to sue Provincial citizenship for jurisdictional purposes

What is the primary purpose of awarding stock options to managers? To give managers the incentive to pursue shareholders' goals, such as, increasing shareholder value To increase bondholders' wealth To decrease managers' wealth so they will no longer have the incentive to increase shareholders' wealth To satisfy the requiremen

To give managers the incentive to pursue shareholders' goals, such as, increasing shareholder value

What is the main goal of financial management? To maximize current share value To maximize current profits To minimize expenses To maximize market share

To maximize current share value

True or false: Accounting profit does not adequately account for cash flow. True False

True

The costs incurred due to a conflict of interest between stockholders and management are called ______ costs. opportunity sunk hidden agency

agency