chapter 1

key questions to ask when it comes to investment

1-what determines the price of financial assets, such as a share of stock 2-What are the potential risks and rewards associated with investing in financial assets 3-what is the best mixture of financial assets to hold?

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

Capital

Why don't large businesses organize as sole proprietorships or partnerships?

It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow.

what is the treasure's office responsible for

Managing the firm's cash and credit, financial planning and its capital expenditure

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

-Corporations can enter contracts. -Corporations are separate legal entities. -Corporations can sue and be sued.

When are corporate profits taxed?

-Corporations pay taxes on corporate profits. -Individuals pay taxes on corporate dividends.

A general partnership has which of the following characteristics?

-Each owner has unlimited liability for all firm debts. -All the partners share in gains or losses of the partnership.

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

-Enron -WorldCom -Tyco

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

limited to their cash contribution to the partnership

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

How many employees will you need

Capital budgeting is concerned with making and managing expenditures on Blank______.

long-term assets

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

long-term debt equity

A treasurer's responsibilities typically include:

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

The goal of a "for-profit" business is to Blank______ the value of shareholders' wealth. Multiple choice question.

maximize

The owners of a corporation are called Blank______. .

shareholders

How is ownership of a corporation represented?

shares of stock

A shareholder's liability is limited to which of these?

the amount the shareholder invested in the corporation

In a for-profit business, owners' equity is equivalent to:

the total value of stock in a corporation.

A partnership must have at least Blank______ owners.

two

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

unlimited

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

working capital

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 (CFO)

A business without separate legal authority formed by two or more people is known as a Blank______.

partnership

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

articles of incorporation

What three subjects is the financial manager concerned with?

capital budgeting capital structure working capital management

Working capital includes which of the following?

cash short-term assets inventory

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

controller

The Blank______ office is responsible for corporate tax reporting.

controller's

The five basic areas of finance include investments, financial institutions, fintech, international finance, and ___________finance.

corporate

The federal government taxes which of the following?

corporate earnings and shareholder dividends

Public limited companies and joint stock companies are other names for ______

corporations

"Increasing shareholder wealth" means increasing the Blank______.

current common stock value

Which of the following is a disadvantage of sole proprietorships and partnerships?

difficulty of transferring ownership

True or false: "Profit maximization" is the goal for the management of a corporation in the short run only.

false- "Profit maximization" is too imprecise. Maximizing short-run profit will not increase value for stakeholders.

One of the important questions in the area of investments includes the potential risks and reward associated with investing in ________ assets.

financial

A partnership in which partners share in gains or losses and carry unlimited liability for all partnership debts is called a Blank______.

general partnership

A sole proprietorship is a business that Blank______.

is owned by one person

What three subjects is the financial manager concerned with?

-capital budgeting -capital structure -working capital management

A good financial decision will do which of the following?

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

Corporations in other countries are often called:

-joint stock companies -limited liability companies -public limited companies

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

-legal powers to sue -the ability to issue stock

A limited liability company's owners have Blank______ liability.

limited

Businesses are motivated to organize as corporations because stockholders in a corporation have Blank______ liability for corporate debts.

limited

What type of partnership involves both general and limited partners to run the business?

limited partnership

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

personal finace

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

treasurer controller

True or false: A corporation borrows money in its own name.

true

True or false: In a large corporation, stockholders and managers are usually separate groups.

true