Corporate Finance Chapter 1

In an over-the counter market, which of the following is true?

1. Participants buy and sell from their own inventory of securities 2. participants are called dealers

The Sarbanes-Oxley Act requires corporate officers to:

1. be responsible for errors in the annual report 2. confirm validity of the financial statements (makes management personally responsible for accuracy of a company's financial statements

Which of the following are reasons that the corporation is the most important form of business?

1. corps can sue and be sued 2. corps are separate legal entities 3. corps can enter contracts

a general partnership has which characteristics?

1. each owner has unlimited liability for all firm debts 2. it is difficult to transfer ownership

Which of the following are important when considering a partnership?

1. external capital raising limitations 2. limited life of the business 3. unlimited liability

A treasurer's responsibilities typically include:

1. handling cash flows 2. managing capital expenditure decisions 3. making financial plans

Business finance is broadly concerned with:

1. how to finance long-term investments 2. which long-term investment to make 3. how to manage day-to-day finances of the firm

A good financial decision will do which of the following?

1. increase the value of the firm's existing stock 2. increase market value of shareholder's equity

which are true of a sole proprietorship?

1. it is one of the simplest types of businesses to form 2. it has a limited life

In an over-the-counter market, which is true?

1. participants are called dealers 2. participants buy and sell from their own inventory of securities

Which of the following are defining features of the primary market?

1. proceeds from the sale of securities goes to the issuing firm 2. it is the market where initial public offerings are made

When a corporation is formed, it is granted which of the following rights?

1. provincial citizenship for jurisdiction purposes 2. legal powers to sue 3. ability to issue stock

The controller is responsible for which tasks?

1. tax reporting and payments 2. financial accounting

How is ownership transferred in a corporation?

By gifting or selling shares of stock

In large firms, financial activity is usually associated with which top officer?

Chief financial officer

corporations in other countries are often called:

Public limited companies, limited liability company, joint stock companies

Which of the following are auction markets in the U.S.?

The Chicago Stock Exchange, The New York Stock Exchange

A shareholders' liability is limited to which of these?

The amount the shareholder invested in the corporation

The relationship between stockholders and management can best be described as a _______ relationship

agency

Costs incurred due to a conflict of interest between stockholders and management are called _________.

agency costs

If you hire a real estate company to sell your house, you are most apt to encounter which one of the following?

agency problem

An organization must prepare ______ and bylaws when forming a corporation

articles of incorporation

Working capital includes which of the following?

cash, short-term assets, inventory

The officer responsible for corporate tax reporting is the _______.

controller

Which corporate officer is responsible for accurate financial accounting of the firm's activities?

controller

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

controller, treasurer

federal government taxes which?

corporate earnings and shareholder dividends

"increasing shareholder's wealth" means increasing the ______.

current common stock value

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

Capital budgeting is concerned with making and managing expenditures on _______.

long-term assets

Which of the following are included in a firm's capital structure?

long-term debt, equity

since _____ and ownership are separated, a corporation's life is unlimited

management

Which of the following is NOT one of the basic areas of finance?

personal finance

mechanism used by unhappy stockholders to replace current management

proxy fight

a ______ gets paid after the employees, suppliers, and creditors

shareholder

Which are considered non-owners stakeholders in a corporation?

suppliers, employees, government

The primary responsibility of financial managers is to increase the value of _________

the existing shares of stocks

What is the primary objective of an auction market?

to bring buyers and sellers together

What is the main goal of financial management?

to maximize current share value

Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of _____ management

working capital