Finance Exam 1 MC

The decision to issue additional shares of stock is an example of which one of the following?

Capital structure decision

A business created as a distinct legal entity and treated as a legal "person" is a:

Corporation

Which one of the following statements is correct?

Both sole proprietorship and partnership income is taxed as individual income

Which of the following terms is defined as the management of a firms long term investments?

Capital Budgeting

Which of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure

Which of the following is a capital budgeting decision?

Deciding whether or not to purchase a new machine for the production line

Corporate bylaws:

Determine how a corporation regulates itself

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

Determining whether to pay cash for a purchase or use the credit offered by the supplier

A business formed by two or more individuals who each have unlimited liability for all of the firms business debts is called a:

General partnership

A limited partner:

Has greater ability to raise capital than a sole proprietorship

Which of the following should a financial manager consider when analyzing a capital budgeting project?

I II III and IV

Which of the following accounts are included in working capital management?

I. Accounts payable II. Accounts Receivable IV. Inventory

The articles of incorporation:

I. Describe the purpose of the firm III. set forth the number of shares of stock that can be issued

Which of the following individuals have unlimited liability based on their ownership interest?

I. General partner II. Sole proprietorship

Which of the following are advantages of the corporate form of business ownership?

I. Limited liability for firm debt III. Ability to raise capital IV. Unlimited firm life

Which of the following apply to a partnership that consists solely of general partners?

II. Limited partnership life III. active involvement in the firm by all partners IV. unlimited personal liability for all partnership debts

Which of the following questions are addressed by financial managers?

II. Should customers be given 30 or 45 days to pay for their credit purchases III. Show the firm borrow money? IV. Should the firm acquire new equipment?

Which of the following functions should be the responsibility of the controller rather than the treasurer?

Income tax returns

Which of the following best illustrates that the management of a firm is adhering the goal of financial management?

Increase in the market value per share

Which of the following statements concerning a sole proprietorship is correct?

It is easy to create a sole proprietorship

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

Limited partnership

Which one of the following best describes the primary advantage of being a limited partner instead of a general partner?

Maximum loss limited to the capital invested

A business owned by a solitary individual who has unlimited liability for its debt is called a:

Sole proprietorship

Which one of the following statements concerning a sole proprietorship is correct?

The owner of a sole proprietorship is personally responsible for all of the companies debts

Which of the following correctly defines the upward chain of command in a typical corporate organizational structure?

The treasurer reports to the vice president of finance

Which of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?

agency problem

A stakeholder is:

any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm

Why should financial managers strive to maximize the current value per share of the existing stock?

because they have been hired to represent the interests of the current shareholders

Which type of business organization has all the respective rights and privileges of a legal person?

corporation

Which one of the following statements is correct?

corporations can raise large amounts of capital generally easier than partnerships can

Which of the following is a capital structure decision?

determining how much debt should be assumed to fund a project

A general partner:

is solely responsible for all the partnership debts

Sally and Alicia currently are general partners in a business located in Atlanta, Georgia. They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected. Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select, they wish to be treated equally.

limited liability company

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

limited partnership

The Sarbanes-Oxley act of 2002 is a governmental response to:

management greed and abuses

Decisions made by financial managers should primarily focus on increasing which one of the following

market value per share of outstanding stock

which of the following best states the primary goal of financial management?

maximize the current value per share

Which one of the following characteristics applies to a limited liability company?

taxed similar to a partnership

The controller of a corporation generally reports directly to the:

vice president of finance

Which of the following is defined as a firm's short term assets and its short term liabilities?

working capital