FINN Chapter 1

The federal government taxes which of the following?

Corporate earnings and shareholder dividends

A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a:

General Partnership

Is profit maximization the primary objective of a business?

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

A corporation receives cash from financial markets by selling ______ and ______.

Stocks, Bonds

agency problem

The conflict of interest between an agent and a principal

What is the main goal of financial management?

To maximize current share value

A bad financial decision is defined as a decision that ______ shareholder wealth.

decreases

A sole proprietorship is a business that

is owned by one person

In a limited partnership, a limited partner's liability for business debts is

limited to their cash contribution to the partnership

A business without separate legal authority formed by two or more people is known as a _____.

partnership

A(n) ______ is someone other than an owner or a creditor who potentially has a claim on the cash flows of the firm.

stakeholder