MGMT 310: Corporate Finance

The decision to issue additional shares of a stock is an example of:

A capital structure decision.

Uses of Cash

A firm's activities in which cash is spent. Also called applications of cash.

Sources of Cash

A firm's activities that generate cash

Working Capital

A firm's short term assets and liabilities. Examples include inventory, short term liabilities - money owed to suppliers, and is a day to day activity that ensures the firm has sufficient resources to continue operations.

The _________ tax rate is equal to total taxes divided by total taxable income

Average

Financial managers should strive to maximize the current value per share of existing stock to:

Best represent the interests of the current shareholders.

Which of the following individuals have unlimited liability for a firm's debt based on their ownership interest?

Both general partners and sole proprietors.

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

Capital structure

A business created as a distinct legal entity and treated as a legal "person" is called a(n):

Corporation.

One disadvantage of the corporate form of business ownership is the:

Double taxation of distributed profits.

Which of the following parties are considered stakeholders of a firm?

Employees and the Government

Capital Structure decisions include determining:

How much debt should be assumed to fund a project.

The growth of both sole proprietorships and partnerships is frequently limited by the firm's:

Inability to raise cash.

Which of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the company's equity.

The maximum rate of growth a corporation can achieve can be increased by:

Increasing the retention ratio.

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

Limited Partner.

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

Limited Partnership.

Which of the following represents a cash outflow from a corporation?

Payment of Dividends

The portion of net income that a firm reinvests in itself is called the:

Retention ratio.

The market value of an asset depends on:

Riskiness and Cashflows.

Financial managers should primarily focus on the interests of:

Shareholders.

Stakeholder

Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Capital Structure

The mixture of debt and equity maintained by a firm.

Primary advantage of being a limited partner is:

The partner's maximum loss is limited to their capital investment.

Agency Problem

The possibility of conflict of interest between stockholders and management of a firm.

Capital Budgeting

The process of planning and managing a firm's long term investments.

The goal of financial management:

To make money or add value for the owners (stockholders).

An example of a capital budgeting decision is deciding:

Whether or not to purchase a new machine for the production line.

_____ operating at full-capacity sales. Thus, sales are currently being limited by the firm's:

fixed assets