FIN 310 Exam 1 HW 1 Problems
provide limited liability while avoiding double taxation.
Limited liability companies are primarily designed to: allow a portion of its owners to enjoy limited liability while granting the other portion of its owners control over the entity. provide the benefits of the corporate structure to foreign-based entities. spin-off a wholly-owned subsidiary. allow companies to reorganize themselves through the bankruptcy process. provide limited liability while avoiding double taxation.
I, II, and IV
Which of the following are advantages of the corporate form of organization? I. Ability to raise large sums of equity capital II. Ease of ownership transfer III. Profits taxed at the corporate level IV. Limited liability for all owners
I, II, III, and IV
Which of the following are potential ways to align 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
Increase protection against corporate fraud
Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002? Increase the costs of going public Increase protection against corporate fraud Limit secondary issues of corporate securities Decrease the number of publicly traded firms Increase the number of firms that "go dark"
Financial Institutions
Jamie is employed as a commercial loan officer for a regional bank centered in the Midwestern section of the U.S. Her job falls into which one of the following areas of finance? a. International finance b. Financial institutions c. Corporate finance d. Capital management e. Investments
Increasing the market value of firm
Which one of the following best matches the primary goal of financial management? Increasing the dollar amount of each sale Increasing traffic flow within the firm's stores Transforming fixed costs into variable costs Increasing the firm's liquidity Increasing the market value of firm
How much cash should the firm keep in reserve?
Which one of the following is a working capital decision? How should the firm raise additional capital to fund its expansion? What debt-equity ratio is best suited to our firm? What is the cost of debt financing? Which type of debt is best suited to finance our inventory? How much cash should the firm keep in reserve?
Losses limited to capital invested
Which one of the following is an advantage of being a limited partner? Non-taxable share of any profits Control over the daily operations of the firm Losses limited to capital invested Unlimited profits without risk of incurring a loss Active market for ownership interest
Compensating managers with shares of stock that must be held for 3 years before the shares can be sold
Which one of the following is most apt to align management's priorities with shareholders' interests? Increasing employee retirement benefits Compensating managers with shares of stock that must be held for 3 years before the shares can be sold Allowing a manager to decorate his or her own office once he or she has been in that office for a period of 3 years or more Increasing the number of paid holidays that long-term employees are entitled to receive Allowing employees to retire early with full retirement benefits
All stock trades between existing shareholders are secondary market transactions.
Which one of the following statements is correct? All secondary markets are dealer markets. All secondary markets are broker markets. All stock trades between existing shareholders are secondary market transactions. All stock transactions are secondary market transactions. All Dutch auction sales are secondary market transactions.
