FINC 3131- HW Chapter 1

Capital budgeting includes the evaluation of which of the following? - Size, timing, and risk of future cash flows - Size of future cash flows only - Size and timing of future cash flows only - Risk and size of future cash flows only - Timing and risk of future cash flows only

Size, timing, and risk of future cash flows

Which one of the following is a general characteristic of a securities broker? - Trades listed securities in an auction market - Trades only foreign securities - Is the principal trader of debt securities - Trades electronically from any geographic location - Trades from his or her own inventory

Trades listed securities in an auction market

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict? - structural - formation - agency - organizational - territorial

agency

Which one of the following statements related to securities dealers is correct? - dealers are limited to trading nonlisted stocks - dealers operate on a physical trading floor - dealers buy and sell from their own inventory - dealers operate exclusively in auction markets - dealers match buyers with sellers

dealers buy and sell from their own inventory

A corporation: - has its identity defined by its bylaws. - has its existence regulated by the rules set forth in its charter. - is ultimately controlled by its board of directors. - is a legal entity separate from its owners. - is prohibited from entering into contractual agreements.

is a legal entity separate from its owners

Which one of the following is most apt to create a situation where an agency conflict could arise? - separating management from ownership - downsizing a firm - reducing both management & nonmanagement series - decreasing employee turnover - increasing the size of a firm's operations

separating management from ownership

Which one of the following statements is correct? - All Dutch auction sales are secondary market transactions. - All secondary markets are dealer markets. - All stock trades between existing shareholders are secondary market transactions. - All stock transactions are secondary market transactions. - All secondary markets are broker markets.

All stock trades between existing shareholders are secondary market transactions

Which one of the following is most apt to align management's priorities with shareholders' interests? - Increasing the number of paid holidays that long-term employees are entitled to receive - Allowing a manager to decorate his or her own office once he or she has been in that office for a period of three years or more - Allowing employees to retire early with full retirement benefits - Increasing employee retirement benefits - Compensating managers with shares of stock that must be held for three years before the shares can be sold

Compensating managers with shares of stock that must be held for three years before the shares can be sold

Which of the following are effective means of aligning management goals with shareholder interests? I. Employee stock options II. Threat of a takeover III. Management bonuses tied to performance goals IV. Threat of a proxy fight - I, III, and IV only - I, II, III, and IV - I, II, and III only - I and III only - II and IV only

I, II, III, and IV

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners? - Limited partnership - Sole proprietorship - Corporation - General partnership - Limited liability company

Limited partnership