Principles of Finance Ch. 1

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

*Controller *Treasurer

Which o the following companies were involved in corporate scandals that led to Sarbanes-Oxley?

*Enron *WorldCom *Tyco *Adelphia

_______ budgeting is the process of planning and managing a firm's long-term assets.

Capital

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

Personal Finance

A bad financial decision is defined as a decision that _____ shareholder wealth.

decreases

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

legal

How is ownership transferred in a corporation?

ownership is transferred by gifting or selling shares of stock

When one owner of creditor sells to another, the transaction takes place in the _____ market

secondary

The owners of a corporation are called

shareholders

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

stakeholder

According to the textbook, which of the following is NOT one of the 3 main questions to be addressed if you wanted to start your own business?

*How many employees will I need

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

*a separate legal entity with the ability to acquire and exchange property *can enter contracts *can sue and be sued

What 3 question are the financial manager concerned with?

*capital structure *working capital management *capital budgeting

Working capital includes which of the following?

*cash *inventory *short-term assets

The Sarbanes-Oxley Act requires corporate officers to:

*confirm the validity of the financial statements *be responsibility for errors in the annual report

Business finance is broadly concerned with which of the following?

*how to manage day-to-day finances of the firm *how to finance long-term investments *which long-term investment to make

A good financial decision will do which of the following?

*increase market value of shareholders' equity *increase the value of the firm's existing stock

A general partnership has which of the following characteristics?

*it is difficult to transfer ownership *each owner has unlimited liability for all firm debts

Which of the following are true of a sole proprietorship?

*it is one of the simplest types of businesses to form *has a limited life

Corporations in other countries are often called:

*limited liability company *joint stock companies *public limited companies

Which of the following are important when considering a partnership?

*limited life of the business *external capital raising limitations *unlimited liability

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

*long-term debt *equity

A treasurer's responsibilities typically include:

*making financial plans *managing capital expenditure decisions *handling cash flows

Which of the following are considered non-owner stakeholders in a company?

*suppliers *employees *government

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

Agency problem

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

Chief financial officer

Which corporate officer is responsible for accurate financial accounting of the firms activities?

Controller

The relationship between stockholders and management can best be described a an ________ relationship.

agency

What is the primary objective of an auction market?

bring buyers and sellers together

Which term applies to the mixture of debt and equity maintained by a firm?

capital structure

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

management

What is the main goal of financial management?

maximize current share value

A corporation receives cash from financial markets by selling ________ and _________.

stocks bonds

Which corporate officer is responsible for managing the firm's cash?

treasurer

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

working capital