FI 352 Chapter 1

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?

Cash management

Which one of the following occupations best fits into the corporate area of finance?

Chief financial officer

Which one of the following is most apt to align management's priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for a minimum of three years

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis.

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict.

The daily financial operations of a firm are primarily controlled by managing the:

working capital.

Which one of the following parties can sell shares of ABC stock in the primary market?

ABC company

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Increase the protections against corporate fraud

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested

Which one of the following is contained in the corporate bylaws?

Procedures for electing corporate directors

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

Sole proprietorship

Which one of the following correctly defines a common chain of command within a corporation?

The controller reports directly to the chief financial officer.

hich one of the following statements is correct?

The primary purpose of the NYSE is to match buyers with sellers.

A private placement is most apt to involve:

a life-insurance company.

Corporate shareholders:

have the ability to change the corporation's bylaws.

A corporation:

is a legal entity separate from its owners.

The issuer of a security must be involved in all _____ transactions involving that security.

primary market

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

General partnership

Which one of the following statements about a limited partnership is correct?

There must be at least one general partner.