3403 Chapter 1 Quiz

Which of the following accounts are included in working capital management?

Accounts Receivable & Inventory

Why should financial managers strive to maximize the current value per share of the existing stock?

Because they have been hired to represent the interests of the current shareholders.

A firm which opts to "go dark" in response to the Sarbanes-Oxley Act:

Can provide less information to its shareholders than it did prior to "going dark.".

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

Capital budgeting.

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure.

Which one of the following is a capital budgeting decision?

Deciding whether or not to purchase a new machine for the production line.

The articles of incorporation:

Describe the purpose of the firm & Set forth the number of shares of stock that can be issued.

Which of the following parties are considered stakeholders of a firm?

Employee & Government

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Increase in the market value per share.

Which of the following are results related to the enactment of the Sarbanes-Oxley Act of 2002?

Increased foreign stock exchange listings of U.S. stocks & Increased privatization of public corporations.

Which one of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the firm's equity.

Sally and Alicia currently are general partners in a business located in Atlanta, Georgia. They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected. Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select, they wish to be treated equally.

Limited liability company.

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

Limited partner.

Which of the following apply to a partnership that consists solely of general partners?

Limited partnership life, Active involvement in the firm by all the partners & Unlimited personal liability for all partnership debts.

The Sarbanes-Oxley Act of 2002 is a governmental response to:

Management greed and abuses.

Which one of the following best states the primary goal of financial management?

Maximize the current value per share.

Which of the following represent cash outflows from a corporation?

Payment of dividends & Payment of government taxes.

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Proxy.

Which one of the following is a primary market transaction?

Sale of a new share of stock to an individual investor.

Which one of the following is defined as a firm's short-term assets and its short-term liabilities?

Working capital.

A stakeholder is:

Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.

Which one of the following statements is generally correct?

Auction markets match buy and sell orders.

Which form of business structure is most associated with agency problems?

Corporation.

Which one of the following is a capital structure decision?

Determining how much debt should be assumed to fund a project.

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

General partnership.

Decisions made by financial managers should primarily focus on increasing which one of the following?

Market value per share of outstanding stock.

Public offerings of debt and equity must be registered with which one of the following?

Securities and Exchange Commission.

Financial managers should primarily focus on the interests of:

Shareholders.

Which one of the following parties has ultimate control of a corporation?

Shareholders.

Which one of the following characteristics applies to a limited liability company?

Taxed similar to a partnership.

Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?

The treasurer reports to the vice president of finance.