Finance Exam 1

Corporate organizations are ____ taxed

double

Agency conflict example

one party influence is to sell, rather than worry about the size of the price of the sale

The daily financial operations of a firm are primarily controlled by managing the: A. total debt level. B. working capital. C. capital structure. D. capital budget. E. long-term liabilities

working capital

Which one of the following is a working capital decision? A. How should the firm raise additional capital to fund its expansion? B. What debt-equity ratio is best suited to the firm? C. What is the cost of debt financing? D. Which type of debt is best suited to finance the inventory? E. How much cash should the firm keep in reserve?

How much cash should the firm keep in reserve?

Agency conflict example is

Rejecting profitable project to keep employees jobs

An income statement according to GAAP,

Records expenses based on the match principle

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

Ability to raise large sums of equity capital, ease of ownership transfer, limited liability for all owners

Working capital(short-term) management includes which of the following? A. Deciding which new projects to accept B. Deciding whether to purchase a new machine or fix a current machine C. Determining which customers will be granted credit D. Determining how many new shares of stock should be issued E. Establishing the target debt-equity ratio

Determining which customers will be granted credit

Which one of the following is a capital structure decision? A. Determining the optimal inventory level B. Establishing the preferred debt-equity level C. Selecting new equipment to purchase D. Setting the terms of sale for credit sales E. Determining when suppliers should be paid

Establishing the preferred debt-equity level

Which one of the following best matches the primary goal of financial management? A. Increasing the dollar amount of each sale B. Increasing traffic flow within the firm's stores C. Transforming fixed costs into variable costs D. Increasing the firm's liquidity E. Increasing the market value of the firm

Increasing the market value of the firm

Capital Structure

The mixture of debt and equity maintained by a firm