Finance 461:

A treasurer's responsibilities typically include:

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

Inventory is a :

- part of working capital - current asset

Direct Agency Costs come in two forms:

1. Corporate expenditure that benefits management but costs stockholders (expensive jet) 2. An expanse that arises from the need to monitor management actions (Paying outside auditors)

Conflict of interest between principle and the agent is known as:

Agency Problem

If you hire a real estate company to sell your house, you are most apt to encounter which one of the following:

Agency Problem

The relationship between management and stockholders is known as:

Agency Relationship

The costs incurred due to a conflict of interest between stockholders and management are called:

Agency costs

An organization must prepare_____and bylaws when forming a corporation

Articles of Incorporation

What can be used to encourage managers to act in the best interest of shareholders:

Better prospects of promotion Managerial compensation tied to performance

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

Bonds and Stocks

The rules used by a corporation to regulate its existence are known as ___________.

Bylaws

Why is a corporation the most important form of business:

Can enter into contracts Can sue or be sued Is a separate entity with the ability to acquire and exchange property

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

Controller

The federal government taxes what:

Corporate Earnings and Shareholder Dividends

A bad financial decision is defined as a decision that _______ owner's equity.

Decreases

Agency costs can be:

Direct or indirect

A general partnership has what characteristics?

Each owner has an unlimited liability for all firm debts It is hard to transfer ownership

In financial markets, debt and _______ securities are bought and sold.

Equity

What is included in a firm's capital structure?

Equity Long-term debt

It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control: True / False

False

True or False: The Sarbanes-Oxley Act provides incentives for companies to go public in US markets

False

In a large corporation, the financial manager is primarily responsible for?

Finance Decisions Financial aspects of operations, such as collections of accounts receivable Long-term Investment Decisions

What is true about a sole proprietorship?

Has a limited lifespan It is the simplest type of business form

A good financial decision aims at what?

Increase market value of shareholder's equity

Corporations in other countries are often called:

Joint stock companies Public limited companies

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

Limited

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 planning and managing a firm's :

Long-term investments

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

Management

The goal of a for-profit business is to _______ existing owners' equity.

Maximize

The goal of financial management:

Maximize the current value per share of the existing stock

What is the main goal of financial management?

Maximize the current value per share of the existing stock

Deferred compensation

Money that is given or received at a later date usually in return for services that have been given or received at the present time

A sole proprietorship is a business that is owned by

One person

Indirect agency costs are often due to lost __________.

Opportunity

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling shares of stock

A limited liability company is taxed like a ________ and it's owners have _________ liability

Partnership; limited

What is important when considering a partnership:

Personal liability for firm debts Taxation of Partnership Income Fund raising limitations

When a corporation raises funds in the financial markets, the transaction occurs on the:

Primary Market

What is a clawback?

Rescinding the tax breaks when firms don't deliver promised jobs

Which one of the following parties would be the last party to receive payment if a firm were to close: Government CEO Bondholders Shareholders

Shareholders

The owners of a corporation are called______.

Stockholders

When a corporation is formed, it is granted what rights:

The ability to issue stock The ability to sue State citizenship for jurisdictional purposes

The liability of a shareholder in a corporation is limited to what:

The amount the shareholder invested in the corporation

The liability of a shareholder in a corporation is limited to what?

The amount the shareholder invested in the corporation

Agency Costs

The costs of the conflict of interest between stockholders and management

The primary responsibility of financial managers is to increase the value of

The existing shares of stock

A partnership must have at least ____ owners

Two

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

Tyco Worldcom Enron

The Sarbanes-Oxley Act requires corporate officers to do which of the following

Confirm the validity of the annual financial report List any deficiencies in internal controls Accept responsibility for material errors in the annual report

Which of the positions typically report to the Chief Financial Officer?

Controller Treasurer