Chapter 1 Connect HW

One advantage of the corporate form of organization is the:

ability to raise larger sums of equity capital than other organizational forms.

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

agency

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict

The primary goal of financial management is most associated with increasing the:

market value of the firm.

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market.

Levi had an unexpected surprise when... Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):

stakeholder

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

A corporation:

is a legal entity separate from its owners.

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

Sole proprietorship

Which one of the following applies to a general partnership?

Any one of the partners can be held solely liable for all of the partnership's debt.

Which one of the following is most apt to align management's priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for a minimum of three years

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

Corporation

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis.

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

capital structure

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

general partnership

A sole proprietorship:

has its profits taxed as personal income.

The daily financial operations of a firm are primarily controlled by managing the:

working capital

The primary goal of financial management is to maximize:

the market value of existing stock.