Chapter 1 Quiz

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

is a legal entity separate from its owners

The primary goal of financial management is to maximize: current profits. market share. current dividends. the market value of existing stock. revenue growth.

market value of existing stock

Which one of the following is a capital structure decision? Determining the optimal inventory level Establishing the preferred debt-equity level Selecting new equipment to purchase Setting the terms of sale for credit sales Determining when suppliers should be paid

Establishing the preferred debt-equity level

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

Limited Partnership

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 Limited partnership Corporation Joint stock company General partnership

Sole proprietorship

Which one of the following statements about a limited partnership is correct? All partners have their losses limited to their capital investment in the partnership. All partners are treated equally. There must be at least one general partner. Equity financing is easy to obtain and unlimited. Any partner can transfer his or her ownership interest without ending the partnership.

There must be at least one general partner

One advantage of the corporate form of organization is the: taxation of the corporate profits. unlimited liability for its shareholders. double taxation of profits. ability to raise larger sums of equity capital than other organizational forms. ease of formation compared to other organizational forms.

ability to raise larger sums of equity capital than other organizational forms.

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: a corporate takeover. a capital structure issue. a working capital decision. an agency conflict. a compensation issue.

an agency conflict

The Sarbanes-Oxley Act of 2002 has: reduced the annual compliance costs of all publicly traded firms in the U.S. decreased senior management's involvement in the corporate annual report. greatly increased the number of U.S. firms that are going public for the first time. decreased the number of U.S. firms going public on foreign exchanges. essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

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: dealer market. over-the-counter market. secondary market. primary market. tertiary market.

secondary market