370 chapter 1

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Which of the following are effective means of aligning management goals with shareholder interests? I). employee stock options; II). threat of a takeover; III). management bonuses tied to performance goals; IV). threat of a proxy fight.

I, II, III, and IV

Which of the following are potential stakeholders of a public corporation? I). company creditors; II). company employees; III). federal and state government; IV). company suppliers.

I, II, III, and IV

Which of the following individuals generally make financial decisions? I). chief financial officers; II). accountants; III). security analysts; IV). student borrowers.

I, II, III, and IV

Which of the following are advantages of the corporate form of organization? I). ability to raise large sums of capital; II). ease of ownership transfer; III). corporate taxation; IV). unlimited firm life.

I, II, and IV only

Which of the following correctly describe a dealer market? I). Dealers match buyers with sellers. II). Dealers buy and sell for themselves at their own risk. III). Dealer trading occurs over-the-counter. IV). Dealer transactions occur on a trading floor.

II and III only

Capital budgeting includes which of the following? I). determining the amount of cash needed on a daily basis to operate a firm; II). identifying assets that produce value in excess of the cost to acquire those assets; III). evaluating the size and timing of future cash flows from a project; IV). evaluating the risks associated with a proposed project

II, III, and IV only

Which one of the following statements is correct concerning the financial markets in the U.S.?

NASDAQ lists significantly more companies than does the NYSE.

Which one of the following statements is correct concerning the secondary markets?

Secondary markets can be either dealer or auction markets.

Which one of the following statements is correct?

The NYSE has the most stringent listing requirements.

Which one of the following situations is most apt to create an agency problem

The production manager is granted an annual bonus based on the size of the firm's total operations.

The potential conflict of interest between a firm's owners and its managers is referred to as a(n)

agency problem

The process of managing a firm's long-term investments is called:

capital budgeting.

A business organization owned by two or more individuals or entities, each of whom has unlimited liability for the firm's debts, is called a

general partnership.

The primary market is

he market where all new issues of debt and equity securities are sold to the public.

Which one of the following actions best matches the primary goal of financial management?

improving the operating efficiency thereby increasing the market value of the stock

The Sarbanes-Oxley Act

makes the officers of a public corporation personally responsible for the firm's financial statements.

Capital structure refers to the

mixture of debt and equity a firm uses to finance its operation

A sole proprietorship is defined as a business

owned by a single individual.

Which one of the following functions should be assigned to the controller rather than the treasurer?

tax management

heresa sold 300 shares of IBM stock on the NYSE today. This transaction occurred in

the secondary market


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Chapter 1: Introduction to Sociology

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