Finance Quiz 1 (Ch.1-2)

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

Agency

The shareholders of Qiang's market 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

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

Automatically increasing management salaries on an annual basis

Which one of the following situations is most apparent to create an agency conflict?

Basing management bonuses on the length of employment

Which of the following is most apparent to align managements priorities with shareholders' interests?

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

The goal of financial management is to increase the?

Current market value per share

Nataro, Incorporated, has sales of $670,000, costs of $337,000, depreciation expense of $82,000, interest expense of $47,000, and a tax rate of 24 percent. What is the net income for this firm?

EBIT(Sales-Costs-Depreciation) 670,000 - 337,000-82,000= 251,000 Net Income(EBIT-Interest Exp) * (1-Tax Rate) 251,000-47,000 * 1-.24= 155,040

The primary goal of financial management is most associated with increasing the?

Market value of the firm

The issuer of a security must be involved in all what transactions involving that security?

Primary market

One example of a primary market transaction would be the?

Sale of 1,000 shares of newly issued stock by Alt company to Miguel

Bing, Incorporated, has current assets of $2,280, net fixed assets of $10,400, current liabilities of $1,405, and long-term debt of $4,090. What is the value of the shareholders' equity account for this firm? How much is net working capital?

Shareholders equity(TA-TL) (2280+10400) - (1405+4090)= 7185 net working capital(CA-CL) (2280-1405)= 875

An agency issue is most apparent to develop when?

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

The primary goal of financial management is to maximize?

The market value of existing stock

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