Fin 381 Final

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

Which one of the following questions involves a capital structure decision?

How much debt should the firm incur to fund a project?

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value.

Which one of the following questions involves a capital budgeting decision?

Should the firm purchase a new machine for the production line?

Which one of the following accounts is the most liquid?

accounts receivable

Which one of the following methods predicts the amount by which the value of a firm will change if a project is accepted?

net present value

Which of the following actions would be considered an agency problem?

A manager in a corporation makes online personal travel arrangements during work hours

Which one of the following statements related to the cash flow to creditors must be correct?

A positive cash flow to creditors represents a net cash outflow from the firm.

Which one of the following is a current liability?

An invoice payable to a supplier in 45 days

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Corporation

Which one of the following best states the primary goal of financial management?

Maximize the current value per share

Project X has cash flows of $8,500, $8,000, $7,500, and $7,000 for Years 1 to 4, respectively. Project Y has cash flows of $7,000, $7,500, $8,000, and $8,500 for Years 1 to 4, respectively. Which one of the following statements is true concerning these two projects given a positive discount rate? (No calculations needed.)

Project X has both a higher present and a higher future value than Project Y.m,nbm, b

Which one of the following is a primary market transaction?

Sale of a new share of stock from a corporation to an individual investor

Symone sold shares of Naraghi Corporation stock to Aleena. The stock is listed on the NYSE. This trade occurred in which one of the following?

Secondary, auction market

Which one of the following statements is correct?

Taxable income earned by a partnership is treated as individual income.

Which one of the following involves a working capital management decision?

What is the maximum level of cash to be kept in the firm's bank account?

Assume the current market price of a bond exceeds its par value. Which one of these relationships applies?

Yield to maturity < Coupon rate

Sullivan bought a bond that will pay him $45 each year in interest plus $1000 as a principal payment at maturity. The $1000 is referred to as the:

face value

Jared invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:

interest on interest.

A partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

limited

A firm's ______ is the firm's mix of short-term assets and short-term liabilities

networking capital

The market required a return of 6.2 percent on the 15-year bonds issues by Lewis-Terrell & Associates. The 6.2 percent is referred to as the:

yield to maturity

Using the dividend growth model. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect:

a decrease in all stock values

Which one of the following is classified as a current asset?

inventory

Decisions made by financial managers should primarily focus on increasing the:

market value per share of outstanding stock.