Corporate Finance MGMT 332 Chapter 1

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

Chief financial officer

Reports to the chief financial officer.

Controller & Treasurer

The basic areas of finance are?

Corporate finance International Investments Financial Institutions

In an over-the-counter market, which of the following is true?

Participants are called dealers Most of the buying and selling is done by the dealer.

Corporations in other countries are often called:

Public limited Joint stock Limited liability

In a shareholder-manager relationship, who is the agent?

Shareholders are the principals Managers are the agents

A _____ is someone other than an owner or a creditor who potentially has a claim on the cash flow of the firm.

Stakeholder

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

The ability to sue provincial citizenship for jurisdictional purposes Legal powers to sue

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

Treasurer

According to the textbook, which of the following are the three main questions to be addressed if you wanted to start your own business?

Where will long-term financing be obtained to pay for investments? What long-term investments should be made? How will everyday financial activities be handled?

Business finance is broadly concerned with which of the following ?

Which long-term investment to make How to finance long-term investments How to manage day-to-day finances of the firm

A sole proprietorship is a business that _____ .

is owned by one person

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

legal

In a limited partnership, a limited partner's liability for business debt is _____ .

limited to their cash contribution to the partners

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

limited to their cash contribution to the partnership.

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

long-term assets

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

secondary

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

WorldCom Enron Tyco

A _____ gets paid after the employees, suppliers, and creditors.

shareholder

The owners of a corporation are called _____ .

shareholders

A corporation receives cash from financial markets by selling _____ and _____ .

stocks bonds

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

the existing shares of stock

What is the primary objective of an auction market?

to bring buyers and sellers together

The officer responsible for managing the firm's cash flow is the _____ .

treasurer

A treasurer's responsibilities typically include:

making financial plans managing capital expenditure decisions handling cash flows

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling of stock.

If you hire a real estate company to sell your home, you are most apt to encounter ________.

Agency problem

Reasons that the corporation is the most important form of business?

Are separate legal entities Can sue and be sued Can enter contracts

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.

What is included in a firm's capital structure?

Equity and long-term debt

True or False: Profit maximization is the best goal for the management of a corporation.

False

Considered non-owner stakeholders in a company:

Government Suppliers Employees

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

Which of the following are defining feature of the primary market?

It is the market where initial public offerings are made. Proceeds from the sale of securities goes to the issuing firm.

A limited company's owners have _____ liability

Limited

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

Long-term debt Equity

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

Management

What three questions are the financial manager concerned with?

capital budgeting capital structure working capital management

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

capital structure

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 responsible for errors in the annual report

The officer responsible for corporate tax reporting is the _____ .

controller

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

financial