SB 1

The possible goal of profit maximization _____.

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

Which of the following are true of a sole proprietorship?

A proprietorship has a limited life. It is the simplest type of business to form.

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 a partnership, one or more _________ partners will run the business and have unlimited liability, but there will be one or more ________ who will not actively participate in the business.

Blank 1: limited Blank 2: limited

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

Capital structure

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

Chief financial officer

The Sarbanes-Oxley Act requires corporate officers to do which of the following?

Confirm the validity of the annual financial report List any deficiencies in internal controls Accept responsibility for material errors in the annual report

Which corporate officer is responsible for accurate financial reporting of the firm's activities?

Controller

The federal government taxes which of the following?

Corporate earnings and shareholder dividends

Which of the following show why a corporation is the most important form of business?

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

Which of the following is included in working capital?

Current (short-term) assets Accounts payable Accounts receivable

What are the two basic classifications under which most potential financial goals fall?

Earning or increasing profits Controlling risk

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

Equity Long-term debt

The controller is responsible for which of the following tasks?

Financial accounting Tax payments

Which of the following are important when considering a partnership?

Fund raising limitations Personal liability for firm debts Taxation of partnership income

Which of the following are considered stakeholders in a company?

Government Suppliers Employees A stakeholder is someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

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. Each owner has unlimited liability for all firm debts.

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

Minimize costs Maximize profits Survival

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.

When a corporation is formed, it is granted which of the following rights?

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

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

Stock options

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

The amount the shareholder invested in the corporation

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

To increase shareholders' wealth

What is the main goal of financial management?

To maximize current value per share of existing stock

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

Treasurer Controller

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

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

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

articles of incorporation

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

capital

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

dividends and debt payments

In a large corporation, the _____ would be responsible for answering the three main questions that must be asked when starting a firm.

financial manager

In a large corporation, the financial manager is primarily responsible for:

financing decisions. financial aspects of operations, such as collections of accounts receivables. long-term investment decisions.

______ partnership, all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just

general

A treasurer's responsibilities typically include:

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

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

In a limited partnership, a limited partner's liability for business debts is

limited to his/her cash contribution to the partnership

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

long term investments

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

management

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

Indirect agency costs are often due to lost ______.

opportunity

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

organized auction markets

The goal of the for-profit business is to maximize_____ equtiy

owners

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

Corporate profits are taxed twice, first at the corporate level when they are earned and again at the level when they are paid out.

personal

A______ is the authority to vote someone else's stock.

proxy

Which one of these is an important mechanism used by unhappy stockholders to replace current management?

proxy fight

Stockholders are entitled to only what is left after employees, suppliers, and creditors are paid, which makes them _____ owners.

residual

Because shareholders get paid last after all other obligations are satisfied, they are often called _____.

residual owners

The corporate goal involving bankruptcy avoidance, stability, and safety relate to controlling

risk

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

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

stakeholder

The owners of a corporation are called ______

stockholders

The primary responsibility of financial managers is to increase the value of _____.

stocks

Firms that are poorly managed are more attractive as acquisitions. This form of threat known as a___motivates managers to act in the stockholders' best interests.

takeover

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

the board of directors

A sole proprietor has ______ personal liability for all business debts and obligations.

unlimited