CH1 HW BT321

Which of the following are legal forms of business​ organization? ​(Select all that​ apply.) A. The sole proprietorship. Your answer is correct. B. The triumvirate. C. The partnership. Your answer is correct. D.The corporation.

A. The sole proprietorship. Your answer is correct. C. The partnership. Your answer is correct. D.The corporation.

There are three basic questions that are addressed by the study of finance. They​ are: ​(Select all that​ apply.) A.How should the firm raise money to fund new investments​ (capital structure​ decisions)? Your answer is correct. B.How can the firm best manage its cash flows as they arise in its​ day-to-day operations​ (working capital management​ decisions)? Your answer is correct. C.What​ long-term investments should the firm undertake​ (capital budgeting​ decisions)? D.Which parts of the company should receive less capital​ (capital rationing)?

A.How should the firm raise money to fund new investments​ (capital structure​ decisions)? Your answer is correct. B.How can the firm best manage its cash flows as they arise in its​ day-to-day operations​ (working capital management​ decisions)? Your answer is correct. C.What​ long-term investments should the firm undertake​ (capital budgeting​ decisions)?

There are four basic principles of finance. Which principle correctly describes the following​ statement: ​ "A dollar today is worth more than a dollar received in the future. ​ Conversely, a dollar received in the future is worth less than a dollar received​ today"? ​(Select the best choice​ below.) A.Principle​ 1: Money has a time value. B.Principle​ 2: There is a​ risk-return tradeoff. C.Principle​ 3: Cash flows are the source of value. D.Principle​ 4: Market prices reflect information.

A.Principle​ 1: Money has a time value.

The​ Sarbanes-Oxley Act of 2002​ (SOX) was passed to directly confront concerns about both agency and ethical issues. Select all of the following statements that correctly describe this act. ​(Select all that​ apply.) A.The purpose of SOX is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the security laws. Your answer is correct. B.Senior executives are no longer held responsible for the accuracy and completeness of the​ firm's financial reports if an accounting firm declares the reports acceptable according to established accounting procedures. C.While the goal of SOX is to provide greater protection against accounting fraud and financial​ misconduct, the demanding reporting requirements of SOX are quite costly and may inhibit firms from listing on U.S. stock markets. Your answer is correct. D.SOX holds corporate advisors who have access to or influence on company​ decisions, legally accountable for any instances of misconduct.

A.The purpose of SOX is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the security laws. Your answer is correct. C.While the goal of SOX is to provide greater protection against accounting fraud and financial​ misconduct, the demanding reporting requirements of SOX are quite costly and may inhibit firms from listing on U.S. stock markets. Your answer is correct. D.SOX holds corporate advisors who have access to or influence on company​ decisions, legally accountable for any instances of misconduct.

The typical business organization for large companies is the corporation. Advantages of the corporate form of business organization​ include: ​ (Select all that​ apply.) A. The corporation is owned by the board of directors who share in the profits and the liabilities of the company. B.Corporations have a greater ease in raising large sums of money than other forms of business organization. Your answer is correct. C.The life of the business is not tied to the status of the corporate owners. Your answer is correct. D.The​ owners' liability is limited to the amount of their investment in the company.

B.Corporations have a greater ease in raising large sums of money than other forms of business organization. Your answer is correct. C.The life of the business is not tied to the status of the corporate owners. Your answer is correct. D.The​ owners' liability is limited to the amount of their investment in the company.

Which basic principle of finance correctly describes the following​ statement: ​ "We won't take on additional risk unless we expect to be compensated with additional​ return"? ​(Select the best choice​ below.) A.Principle​ 1: Money has a time value. B.Principle​ 2: There is a​ risk-return tradeoff. C.Principle​ 3: Cash flows are the source of value. D.Principle​ 4: Market prices reflect information.

B.Principle​ 2: There is a​ risk-return tradeoff.

Which of the following statements regarding a sole proprietorship are​ correct? ​(Select all that​ apply.) A.One advantage of the sole proprietorship is that the survival of the firm does not depend upon just one person. B.Sole proprietorships are easy to set up with no paperwork required before the business can be opened. Your answer is correct. C.The sole proprietor is personally responsible for all debt of the sole proprietorship. Your answer is correct. D.Sources of funds for a sole proprietorship typically include personal​ savings, as well as raising funds from a bank or personal loans from friends and family.

B.Sole proprietorships are easy to set up with no paperwork required before the business can be opened. Your answer is correct. C.The sole proprietor is personally responsible for all debt of the sole proprietorship. Your answer is correct. D.Sources of funds for a sole proprietorship typically include personal​ savings, as well as raising funds from a bank or personal loans from friends and family.

When managers have little or no ownership in the​ firm, they are less likely to work energetically for the​ company's shareholders. We call this type of conflict​ a(n) __________. ​ (Select the best choice ​ below.) A.moral problem B.agency problem Your answer is correct. C.management problem D.ownership problem

B.agency problem

One attractive alternative to the corporation for a small business is the​ __________ because it combines the tax benefits of a partnership with the limited liability of a corporation. ​(Select the best choice​ below.) A.general partnership B.limited liability company Your answer is correct. C.sole proprietorship D.limited partnership

B.limited liability company

Which basic principle of finance correctly describes the following​ statement: ​ "Profit is an accounting concept designed to measure a​ business's performance over an interval of time. Cash flow is the amount of cash that can actually be taken out of the business over this same​ interval"? ​(Select the best choice​ below.) A.Principle​ 1: Money has a time value. B.Principle​ 2: There is a​ risk-return tradeoff. C.Principle​ 3: Cash flows are the source of value. D.Principle​ 4: Market prices reflect information.

C.Principle​ 3: Cash flows are the source of value.

Which basic principle of finance correctly describes the following​ statement: ​ "Investors respond to new information by buying and selling their investments. The speed with which investors act and the way that prices respond to the information determine the efficiency of the​ market"? ​(Select the best choice​ below.) A.Principle​ 1: Money has a time value. B.Principle​ 2: There is a​ risk-return tradeoff. C.Principle​ 3: Cash flows are the source of value. D.Principle​ 4: Market prices reflect information.

D.Principle​ 4: Market prices reflect information.

Even if you are not planning a career in​ finance, a working knowledge of finance can be useful in both your personal and professional life for the following​ reasons: ​(Select the best choice​ below.) A. As an individual you will be faced with numerous financial decisions throughout your life. Knowledge of financial principles will help you make the right decisions. B. Even if you do not pursue a career in​ finance, you may find yourself working closely with finance managers. C. For those who plan to be​ entrepreneurs, managing company finances is crucial to the survival of the firm. D. Financial management is a key component of other academic disciplines such as​ management, marketing, production and operations​ management, and accounting. E. All of the above are correct.

E. All of the above are correct.

There are several measures that can be taken to help limit the agency problem. ​ (Select the best choice​ below.) A.Compensation plans can be put in place to reward managers when they maximize shareholder wealth. B.The board of directors can actively monitor the actions of managers to keep pressure on them to act in the best interest of shareholders. C.Firms that fail to maximize shareholder wealth may be taken over and their management team replaced. D.Financial markets play a key role in monitoring management. E. All of the above are correct.

E. All of the above are correct.

In a large corporation the primary responsibility for overseeing the​ firm's finance-related activities falls to​ the: ​(Select the best choice​ below.) A.Vice President for Marketing. B.Vice President for Production and Operations. C.Board of directors. D.Chief Executive Officer​ (CEO). E.Chief Financial Officer​ (CFO).

E.Chief Financial Officer​ (CFO).