Financial Concept Questions

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

Agency

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

Basing management bonuses on the length of employment

Which one of the following is most apt to align management's priorities with shareholders' interests?

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

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

Working capital management includes which one of the following?

Determining which customers will be granted credit

Which one of the following is a capital structure decision?

Establishing the preferred debt-equity level

Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge of:

capital structure management.

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.

The Sarbanes-Oxley Act:

require the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.

An agency issue is most apt 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.

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as:

working capital management.

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Increase the protections against corporate fraud

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

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.

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

automatically increasing management salaries on an annual basis.

The goal of financial management is to increase the:

current market value per share.