Ch 1 LS MBA 8160 Finance

A treasurer's responsibilities typically include: financial accounting. making financial plans. handling cash flows. managing capital expenditure decisions.

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

The life of a corporation ______. is unlimited ends when a founding shareholder wants to sell his shares ends when all of the original shareholders are deceased is limited to 65 years

is unlimited

In large firms, financial activity is usually associated with which top officer? Multiple choice question. vice president of production vice president for marketing chief financial officer chief management consultant

chief financial officer

Which of the following, according to the textbook, are possible financial goals for a company? Multiple select question. incur bankruptcy maximize profits minimize costs survival

maximize profits minimize costs survival

True or false: Limited partners manage the day to day operations of a business. True/False

False

In many public companies, ________ is dispersed among many shareholders. This dispersion arguably means that management effectively controls the firm.

Blank 1: ownership or Ownership

Agency costs refer to the costs of the conflict of interest between _______ and __________

Blank 1: stockholders, shareholders, or principal Blank 2: management, managers, or agent

______ budgeting is the process of making and managing expenditures on long-term assets. Optional Capital Conventional Performance-based

Capital

What determines when a sale is recorded for accounting purposes?

Generally accepted accounting principles

Businesses are motivated to organize as corporations because stockholders in a corporation have Blank______ liability for corporate debts. Multiple choice question. limited personal no unlimited

Limited

Since Blank______ and ownership are separated, a corporation's life is unlimited. Multiple choice question. profitability taxation management debt

Management

A sole proprietorship is a business owned by Blank______ person(s). two three one four or more

One

The Sarbanes-Oxley Act established which government agency? Multiple choice question. Public Company Accounting Oversight Board the House Ways and Means Committee the New York Stock Exchange the Federal Reserve Board

Public Company Accounting Oversight Board

Accounting profit does not adequately account for cash flow. True false question.TrueFalse

True

Select all that apply Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley? Multiple select question. WorldCom Tyco Enron Disney

WorldCom Tyco Enron

The left side of a balance sheet shows a firm's current and fixed ______.

assets Reason: Assets are listed on the left side of a balance sheet.

The purpose of a firm is to ______.

create value for the owner

On a balance sheet, patents and trademarks are classified as ______.

fixed assets

A sole proprietorship is a business that Blank______. provides limited personal liability to its owner is similar to a limited partnership is owned by one person is organized with bylaws

is owned by one person

A firm's balance sheet shows a snapshot of its finances _____.

at a point in time Reason: The balance sheet incorporates all activities of the firm during its life. At any point in time, a person can view its financial standing by looking at the balance sheet.

Select all that apply Which of the following are examples of current assets? equipment cash patents inventory

cash inventory

Which of the following acts provides the basic regulatory framework for issuing new securities? Multiple choice question. the Securities Act of 1934 Sarbanes-Oxley Act the Securities Act of 1933

the Securities Act of 1933

Identify which assets last a long time and include items such as equipment, land, machinery, or buildings.

fixed

When a corporation is formed, it is granted which of the following rights? (Check all that apply.) provincial citizenship for jurisdictional purposes Corporate life of up to 100 years legal powers to sue the ability to issue stock

provincial citizenship for jurisdictional purposes legal powers to sue the ability to issue stock

The main job of a financial manager is to Blank______. Multiple choice question. appease government agencies make bondholders happy create value for shareholders

create value for shareholders

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

residual owners

If a shareholder purchases $5,000 of Coca-Cola stock, what is the maximum amount they could lose? Multiple choice question. $5,000 $0 unlimited amount $1,000

$5,000

A current liability is defined as debt that must be repaid within which period of time? 30 days 6 months never 1 year

1 year

What is the order of payments received of the following parties, from first to last. Assume all parties have a legitimate claim on the firm's assets. Position 1 of 3 shareholders incorrect toggle button unavailable shareholders

1. Employees 2. Bondholders 3. Shareholders

Which corporate officer is responsible for the accounting function of a firm? Treasurer Credit manager Controller Corporate secretary

Controller

Which of the following business forms is easiest to transfer ownership stakes in? Multiple choice question. sole proprietorship partnership corporation

Corporation

Bylaws of a corporation concern which of the following groups? Multiple select question. directors bondholders officers shareholders

Directors Shareholders Officers

A corporation is a distinct Blank______ entity and as such can have a name and take advantage of the legal powers of natural persons. Multiple choice question. illegal patriotic retributive legal

Legal

Which of the following are owners of a corporation? Multiple choice question. shareholders partners directors bondholders

shareholders

A current asset has a(n) ______ life. short fixed indeterminate long

short

Under profit maximization, managers have an incentive to maximize Blank______-term profits to the detriment of Blank______-term value. Multiple choice question. short; long short; short long; long long; short

short; long

Businesses are motivated to organize as corporations because stockholders in a corporation have Blank______ liability for corporate debts. Multiple choice question. no limited personal unlimited

Limited

A shareholder's liability is limited to which of these? Multiple choice question. the corporation's outstanding long-term debt the corporation's current liabilities The percentage of corporate debt that equals the shareholder's ownership percentage the amount the shareholder invested in the corporation

the amount the shareholder invested in the corporation

Which of the following is most complicated to start? Multiple choice question. the sole proprietorship the partnership the corporation

the corporation

The primary responsibility of financial managers is to increase the value of Blank______. Multiple choice question. future profits the existing shares of stock current earnings their total compensation package

the existing shares of stock

What is the main goal of financial management? Multiple choice question. to maximize current profits to maximize market share to minimize expenses to maximize current share value

to maximize current share value

Shareholders' equity is the difference between which of the following? total assets and long-term debt current assets and current liabilities total assets and total debt fixed assets and long-term debt

total assets and total debt

Select all that apply Which of the following positions generally report to the chief financial officer (CFO)? . director of marketing treasurer controller chief executive officer (CEO)

treasurer controller

Select all that apply Which of the following are examples of fixed assets? warehouses equipment office supplies inventory

warehouses equipment

Assuming interest rates are positive and are greater than the inflation rate, one dollar received today is worth Blank______ one dollar received next year. Multiple choice question. either more than or less than (but which is uncertain) less than the same as more than

More than

How is ownership transferred in a corporation? Multiple choice question. Ownership is transferred by gifting or selling shares of stock. Ownership in a corporation cannot be transferred. Ownership is transferred only with prior approval from the board of directors. Ownership can be transferred only if the firm is sold.

Ownership is transferred by gifting or selling shares of stock.

A ____________ ______________ allows unhappy stockholders a method to replace existing management.

Proxy Fight

Select all that apply Which of the following is true concerning government regulation? Multiple select question. Regulation generally imposes costs without any benefits. Regulation can be costly to a firm. Regulation can help reduce conflicts of interest between managers and shareholders. Regulation can help ensure firms disclose relevant information to investors.

Regulation can be costly to a firm. Regulation can help reduce conflicts of interest between managers and shareholders. Regulation can help ensure firms disclose relevant information to investors.

What happens when a firm creates value? Shareholder wealth remains unchanged. Shareholder wealth increases. Total expenses decrease. Shareholder wealth decreases.

Shareholder wealth increases.

What happens when a firm creates value?

Shareholder wealth increases. Reason: Shareholder wealth increases when a firm creates value.

The owners of a corporation are called Blank______. Multiple choice question. partners shareholders government agents bondholders

Shareholders

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. Multiple choice question. bondholders chief executive officer shareholders government

Shareholders

Select all that apply Which of the following statements are true about shareholders' equity? Shareholders' equity is a residual claim on a firm's assets. Shareholders' equity represents the claim on a firm's assets by the firm's creditors. Shareholders' equity is the difference between the value of a firm's assets and its debt. Shareholders' equity is the difference between the value of a firm's debt and its current assets.

Shareholders' equity is a residual claim on a firm's assets . Shareholders' equity is the difference between the value of a firm's assets and its debt.

Which corporate officer is responsible for managing the firm's cash? Sales Manager Treasurer Cost accounting manager Controller

Treasurer

A partnership must have at least Blank______ owners. Multiple choice question. ten four two three

Two

Which of the following shows a snapshot of a firm's finances at a given point in time?

balance sheet

Select all that apply A corporation receives cash from financial markets by selling Blank______ and Blank______. Multiple select question. bonds stocks finished goods land

bonds stocks

The rules used by a corporation to regulate its existence are known as Blank______. Multiple choice question. bylaws a legal settlement articles of incorporation restatements of facts

bylaws

Which term applies to the mixture of debt and equity maintained by a firm? net working capital capital budget cash management capital structure

capital structure

Which of the following are examples of current assets?

cash Reason: Current assets include cash, accounts receivable, and inventory. By definition, they are assets that will be on the balance sheet for at most 1 year (or one operating cycle, whichever is longer). inventory Reason: Current assets include cash, accounts receivable, and inventory. By definition, they are assets that will be on the balance sheet for at most 1 year (or one operating cycle, whichever is longer).

The federal government taxes which of the following? Multiple choice question. neither corporate earnings nor shareholder dividends corporate earnings but not shareholder dividends corporate earnings and shareholder dividends shareholder dividends but not corporate earnings

corporate earnings and shareholder dividends

Select all that apply Which of the following are included in a firm's capital structure? equity long-term debt current assets net sales

equity long-term debt

Which of the following are disadvantages faced by corporations? Multiple choice question. federal tax treatment limited liability perpetual succession ease of ownership transfer

federal tax treatment

Select all that apply A good financial decision will do which of the following? Multiple select question. increase the value of the firm's existing stock increase current dividends per share increase the cost of capital increase the market value of shareholders' equity

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

The 1934 Securities Exchange Act deals with the important issue of Blank______ trading. Multiple choice question. government insider day outsider

insider

Capital budgeting is concerned with making and managing expenditures on Blank______. current assets current liabilities long-term liabilities long-term assets

long-term assets

Corporate bonds are generally classified as ______. current liabilities long-term debt fixed assets shareholders' equity

long-term debt

The financial goal of profit maximization is associated with which of the following?

maintenance deferment cost-cutting critical inventory reduction

Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that Blank______ effectively controls the firm.

management

Select all that apply Which of the following are reasons why businesses organize as corporations? Multiple select question. perpetual succession federal tax treatment limited liability ease of ownership transfer

perpetual succession limited liability ease of ownership transfer

Cash generated by a firm is paid to __________ and _________

Blank 1: shareholders or stockholders Blank 2: bondholders or creditors

In a general partnership, each partner shares the ___________ and _____________

Blank 1: profits or profit Blank 2: losses or loss

A ______ liability does not have to be paid within 1 year. current long-term short-term restive

long-term

The Sarbanes-Oxley Act requires corporate officers to do which of the following? Multiple select question. Accept responsibility for material errors in the annual report. List any deficiencies in internal controls. Limit their compensation and stock options. Confirm the validity of the annual financial report.

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

Which of the following is an example of a current liability?

accounts payable

Some of the cash flow generated by a firm goes back to the financial markets in the form of Blank______. Multiple choice question. products and services dividends and debt payments taxes and other payments to the government reinvested cash flows

dividends and debt payments

Which of the following are disadvantages faced by corporations? Multiple choice question. limited liability federal tax treatment perpetual succession ease of ownership transfer

federal tax treatment