Business Finance: Exam 1

Corporations in other countries are often called

-joint stock companies -public limited companies -limited liability companies

Basic Areas of Finance

1. corporate finance 2. investments 3. financial institutions 4. international finance

A partnership must have at least _______ owners.

2

In large firms, financial activity is usually associated with which top officer? A. Chief management consultant B. Chief financial officer C. Vice president for marketing D. Vice president of production

B. Chief financial officer

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.

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling shares of stock

defining features of the primary market?

Proceeds from the sale of securities goes to the issuing firm It is the market where initial public offerings are made

How is ownership of a corporation represented?

Shares of stock

True or false: In a large corporation, stockholders and managers are usually separate groups.

True

A general partnership has which of the following characteristics? a. Large amounts of cash can be raised easily. b. Each owner has unlimited liability for all firm debts. c. It is always regulated by a formal partnership agreement. d. All the partners share in gains or losses of the partnership.

b. Each owner has unlimited liability for all firm debts. and d. All the partners share in gains or losses of the partnership.

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

partnership

The owners of a corporation are called ______.

shareholders

corporations in other countries are often called a. public limited companies b. joint stock companies c. re-calibrated partnerships d. autonomous entities e. limited liability company

> Public Limited Companies > Limited Liability Company > Joint Stock Company

True or False: A corporation borrows money in its own name.

True

Which of the following are reasons that the corporation is the most important form of business? a. Corporations can enter contracts. b. Corporations can vote in general elections c. Corporations are separate legal entities. d. Corporations can sue and be sued.

a. Corporations can enter contracts, c. Corporations are separate legal entities, and d. Corporations can sue and be sued.

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

b. The amount the shareholder invested in the corporation

Capital budgeting is concerned with making and managing expenditures on _____. a. current liabilities b. long-term assets c. long-term liabilities d. current assets

b. long-term assets

A sole proprietor has ______ personal liability for all business debts and obligations. a. little b. unlimited c. no d. limited

b. unlimited

Which of these topics is not of especial interest to a financial manager? A. Capital budgeting B. Capital structure C. Debt D. Working capital management

C. Debt

Which of the following are true of a sole proprietorship? A. A proprietorship has a limited life. B. The owner has limited liability for business debts. C. It is one of the simplest types of businesses to form. D. A sole proprietor can issue stock to raise capital.

A. A proprietorship has a limited life. and C. It is one of the simplest types of businesses to form.

A general partnership has which of the following characteristics? A. Each owner has unlimited liability for all firm debts. B. All the partners share in gains or losses of the partnership. C. It is always regulated by a formal partnership agreement. D. Large amounts of cash can be raised easily.

A. Each owner has unlimited liability for all firm debts. and B. All the partners share in gains or losses of the partnership.

_____________ budgeting is the process of planning and managing a firm's long-term assets.

Capital

According to the textbook, which of the following is not one of the three main questions to be addressed if you wanted to start your own business? A. Where will long-term financing be obtained to pay for investments? B How will everyday financial activities be handled? C. What long-term investments should be made? D. How many employees will I need?

D. How many employees will I need?

Which of the following is NOT one of the basic areas of finance? A. Corporate finance B. Financial institutions C. International finance D. Personal finance E. Investments

D. Personal finance

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

D. The amount the shareholder invested in the corporation

A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a: a. corporation b. limited liability partnership c. general partnership d. proprietorship

c. general partnership

What three subjects is the financial manager concerned with?

capital structure, capital budgeting, and working capital management

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

d. limited

A sole proprietorship is a business that _______. a. is organized with bylaws b. is owned by one person c. provides limited personal liability to its owner d. is similar to a limited partnership

b. is owned by one person

Sarbanes-Oxley Act

A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate.

Which of the following positions generally report to the chief financial officer (CFO)?

Controller and Treasurer

When a corporation is formed, it is granted which of the following rights? a. Corporate life of up to 100 years b. Legal powers to sue c. The ability to issue stock d. Citizenship for casting vote in presidential election of the country

b. Legal powers to sue c. The ability to issue stock

An organization must prepare ______ and bylaws when forming a corporation. a. a partnership agreement b. articles of incorporation c. an indenture agreement d. a legal will

b. articles of incorporation

A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons. a. patriotic b. illegal c. legal d. retributive

c. legal