Chapter 1 homework FINANCE
Which one of the following parties can sell shares of ABC stock in the primary market?
ABC company
Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:
Capital structure
Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?
General partnership
Which one of the following is an advantage of being a limited partner?
Losses limited to capital invested
What is the most appropriate goal of a business firm?
Maximize shareholder (or owner) wealth
What is the primary goal of financial management for a sole proprietorship?
Maximize the market value of the equity
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:
Working capital management
Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?
Sole proprietorship
One advantage of the corporate form of organization is the:
ability to raise larger sums of equity capital than other organizational forms.
The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?
agency
The shareholders of Weil's Markets 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
The field of study that is most closely associated with how decisions are made to allocate scarce resources efficiently is:
economics
A sole proprietorship:
has its profits taxed as personal income.
A corporation:
is a legal entity separate from its owners.
One example of a primary market transaction would be the:
sale of 1,000 shares of newly issued stock by Alt Company to Miquel.
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
The primary goal of financial management is most associated with increasing the:
the market value of the firm
In a general partnership, each partner is personally liable for:
the total debts of the partnership, even if he or she was unaware of those debts.
