FIN 323 Learnsmart reading Chapter 1

The possible goal of profit maximization _____.

-can be achieved by cost-cutting AND -would probably be the most commonly sighted goal for a business

Which of the following can be used to encourage managers to act in the best interests of shareholders?

Better prospects of promotion AND Managerial compensation tied to performance

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

Chief financial officer (CFO)

What are the two factors that impact whether managers will act in the best interest of stockholders?

How closely management goals align with stockholder goals and the way managers are compensated

A general partnership has which of the following characteristics?

It is difficult to transfer ownership AND Each owner has unlimited liability for all firm debts.

Corporations in other countries are often called:

Joint stock companies OR Public limited companies

Which of the following, according to the textbook, are possible financial goals for a company?

Maximize profits AND Survival AND Minimize costs

The aim of the act known as ______ is to protect investors from corporate abuse.

SOX

The liability of a shareholder in a corporation is limited to which of these?

The amount the shareholder invested in the corporation

What is the main goal of financial management?

To maximize current value per share of existing stock

The __ are rules describing how the corporation regulates its existence.

bylaws

______ budgeting is the process of making and managing expenditures on long-term assets.

capital

Joint stock company is another name for what is referred to as a __ in the United States.

corporation

Some of the cash flow generated by a firm goes back to the financial markets in the form of

dividends and debt payments

In financial markets, debt ___ and securities are bought and sold.

equity

True or false: Ownership in the corporate form is difficult to transfer.

false

The life of a corporation ______.

is unlimited

Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts.

limited

Stockholders in a corporation have _____ liability for corporate debts.

limited

he goal of the for-profit business is to maximize ___ equity.

owners

In a corporation, the stockholders elect _____, who then select the managers

the board of directors

The financial manager acts in the shareholders' best interests by making decisions that increase the value of

the stock

The financial manager acts in the shareholders' best interests by making decisions that increase the value of _____.

the stock

A benefit corporation is for profit, and has the legal attributes of accountability, _____, and purpose.

transparency

A partnership must have at least _______ owners.

two

Which of the following show why a corporation is the most important form of business? select all that apply

A corporation is a separate legal entity with the ability to acquire and exchange property. AND Corporations can enter into contracts. AND Corporations can sue and be sued.

Organized auction markets include:

New York Stock Exchange

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling shares of stock.

In addition to the importance of finance for marketing, accounting, and management careers, finance is also now considered a ______ discipline, especially at the graduate level.

STEM

Which of the following are considered stakeholders in a company?

Suppliers Employees Government

From the stockholders' perspective, what is the primary purpose of awarding stock options to managers?

To increase shareholders' wealth

Which of the following are among the most important questions to be asked when a business is started? select all that apply

Where will long-term financing be obtained to pay for investments? AND How will everyday financial activities be handled? AND What long-term investments should be made?

Which of the following is not an important question that must be asked when starting a firm? Multiple choice question.

Which type of operating system should you use for your computers?

Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley? select all that apply

WorldCom Tyco Enron

The relationship between stockholders and management can best be described as a(n) ______ relationship.

agency

An organization must prepare ______ and bylaws when forming a corporation.

articles of incorporation

A __ corporation is for profit, and has the legal attributes of accountability, transparency, and purpose.

benefit

Forming a corporation involves preparing articles of incorporation and a set of

bylaws

The rules used by a corporation to regulate its existence are known as

bylaws

The __ is the most important form, in terms of size, of business organization in the United States

corporation

t/f Finance is only important to study if you are planning a career in finance.

false

t/f It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control.

false

In a __ partnership, all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share.

general

A sole proprietorship is a business that _______.

is owned by one person

A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons.

legal

Capital budgeting is concerned with planning and managing a firm's _____.

long-term investments

Since ________ and ownership are separated, a corporation's life is unlimited.

management

Because ownership in a corporate is spread over a huge number of shareholders, it can be argued that ___ effectively controls the firm.

management or managers

In a shareholder-manager relationship, who is the agent?

managers

The goal of a for-profit business is to Blank______ existing owners' equity.

maximize

Most equity shares of large firms in the U.S. trade on:

organized auction markets

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

partnership

Which one of these provides a manager an incentive to perform well?

promotions

The relative ease of transferring ownership, the limited liability for business debts, and the unlimited life of the business are why the corporate form is superior to sole proprietorships or partnerships for _____

raising cash

A ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm.

stakeholder

______ are frequently used to encourage key managers to maximize the value of the firm's stock.

stock options

Managers who are successful in pursuing _____ will be in greater demand in the labor market and thus command higher salaries. Multiple choice question.

stockholder goals

The owners of a corporation are called:

stockholders

Which of the following positions generally report to the chief financial officer (CFO)? select all that apply

treasurer AND controller

When a corporation is formed, it is granted which of the following rights? select all that apply

State citizenship for jurisdictional purposes AND Legal powers to sue AND The ability to issue stock

It is argued that, left to themselves, managers would tend to maximize the amount of resources over which they have control or, more generally, ___ power or wealth.

corporate

The five main areas of finance are corporate finance, investments, financial institutions, international finance, and

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