Finance Chapter 1
which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley
Enron Tyco WorldCom
Corporations in other countries are often called:
Joint stock companies Public limited companies
how is ownership transferred in a corporation
Ownership is transferred by gifting or selling shares of stock
which of the following show why a corporation is the most important form of business
a corporation is a separate legal entity with the ability to acquire and exchange property corporations can enter into contracts corporations can sue and be sued
which of the following is included in working capital
accounts receivable current (short-term) assets accounts payable
which of the following is included in working capital
accounts receivable accounts payable current (short-term) assets
the relationship between stockholders and management can best be described as a(n) _____ relationship
agency
the costs incurred due to a conflict of interest between stockholders and management are called
agency costs
an organization must prepare ____ and bylaws when forming a corporation
articles of incorporation
which of the following can be used to encourage managers to act in the best interests of shareholders
better prospects of promotion managerial compensation tied to performance
the rules used by a corporation to regulate its existence are known as
bylaws
which term applies to debt and equity maintained by a firm
capital structure
what are the two basic classifications under which most potential financial goals fall
controlling risk earning or increasing profits
the federal government taxes which of the following
corporate earnings and shareholder dividends
a bad financial decision is defined as a decision that _____ owners' equity
decreases
the need to monitor management actions is an example of a ____ (direct/indirect) agency cost
direct
a general partnership has which of the following characteristics
each owner has unlimited liability for all firm debts it is difficult to transfer ownership
in financial markets, debt and _____ securities are bought and sold
equity
it is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control
false
true or false: the sarbanes-oxley act provides incentives for companies to go public in US markets
false
which of the following are important when considering a partnership
fund raising limitations taxation of partnership income personal liability for firm debts
a sole proprietorship is a business that
is owned by one person
the life of a corporation ____
is unlimited
a corporation is a distinct ____ entity and as such can have a name and take advantage of the legal powers of natural persons
legal
when a corporation is formed, it is granted which of the following rights
legal powers to sue the ability to issue stock state citizenship for jurisdictional purposes
businesses are motivated to organize as corporations because stockholders in a corporation have ____ liability for corporate debts
limited
in a limited partnership, a limited partner's liability for business debts is
limited to their cash contribution to the partnership
the sarbanes-oxley act requires corporate officers to do which of the following
list any deficiencies in internal controls confirm the validity of the annual financial report accept responsibility for material errors in the annual report
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
since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that _____ effectively controls the firm
management
a treasurer's responsibilities typically include
managing capital expenditure decisions handling cash flows making financial plans
the goal of a for-profit business is to ____ existing owners' equity
maximize
what is the main goal of financial management
maximize the current value per share of existing stock
which of the following, according to the textbook, are possible financial goals for a company
minimize costs survival maximize profits
indirect agency costs are often due to lost __________.
opportunities
inventory is a:
part of working capital current asset
a business without separate legal authority formed by two or more people is known as a
partnership
a limited liability company is taxed like a ____ and its owners have ____ liability
partnership limited
which one of these provides a manager an incentive to perform well
promotions
which one of these is an important mechanism used by unhappy stockholders to replace current management
proxy fight
Because shareholders get paid last after all other obligations are satisfied, they are often called:
residual owners
when one owner of a security sells the security to another person, the transaction takes place in the ____ market
secondary
which one of the following parties would be the last party to receive payment if a firm were to close? assume all parties have a legitimate claim on the firm's assets
shareholders
____ are frequently used to encourage key managers to maximize the value of the firm's stock
stock options
the owners of a corporation are called
stockholders
a corporation receives cash from financial markets by selling ________ and _________.
stocks bonds
which of the following are considered stakeholders in a company
suppliers government employees
the controller is responsible for which of the following tasks
tax payments financial accounting
the liability of a shareholder in a corporation is limited to which of these
the amount the shareholder invested in the corporation
the primary responsibility of financial managers is to increase the value of
the existing shares of stock
organized auction markets include:
the new york stock exchange
which one of these motivates managers to make good decisions
threat of a hostile takeover
the officer responsible for managing the firm's cash flows is the
treasurer
a sole proprietor has ____ personal liability for all business debts and obligations
unlimited