Financial Management chapter 1

Which of the following are cash flows from a corporation into the financial markets? I. Repayment of long-term debt. II. Payment of government taxes. III. Payment of loan interest. IV. Payment of quarterly dividend.

1, 3 and 4

Which of the following accounts are included in working capital management? I. Accounts Payable II. Accounts Receivable III. Fixed Assets IV. Inventory

1,2 and 4

Which of the following should a financial manager consider when analyzing a capital budgeting project? I. Project start-up costs. II. Timing of all projected cash flows. III. Dependability of future cash flows. IV. Dollar amount of each projected cash flow.

1,2,3 and 4

Which of the following are advantages of the corporate form of business ownership? I. Limited liability for firm debt. II. Double taxation. III. Ability to raise capital. IV. Unlimited firm life.

1,3 and 4

Which of the following represent cash outflows from a corporation? I. Issuance of securities. II. Payment of dividends. III. New loan proceeds. IV. Payment of government taxes.

2 and 4

Public offerings of debt and equity must be registered with which one of the following?

Securities and Exchange Commission

Which one of these is a working capital management decision? a)Determining the minimum level of cash to be kept in a checking account. b)Determining the best method of producing a product. c)Determining the number of employees needed to work during a particular shift. d)Determining when to replace obsolete equipment. e)Determining if a competitor should be acquired.

a)Determining the minimum level of cash to be kept in a checking account

Why should financial managers strive to maximize the current value per share of the existing stock?

because they have been hired to represent the interests of the current shareholders

Which one of the following is an unintended result of the Sarbanes-Oxley Act? a)more detailed and accurate financial reporting b)increased management awareness of internal controls c)corporations delisting from major exchanges d)increased responsibility for corporate officers e)identification of internal control weaknesses

c) corporations delisting from major exchanges

Which form of business structure is most associated with agency problems?

corporation

Which type of business organization has all the respective rights and privileges of a legal person?

corporation

Which one of the following statements concerning stock exchanges is correct? a) NASDAQ is a broker market b)The NYSE is a dealer market c)The exchange with the strictest listing requirements is NASDAQ d)Some large companies are listed on NASDAQ e)Most debt securities are traded on the NYSE

d) some large companies are listed on NASDAQ

Corporate bylaws:

determine how a corporation regulates itself

Which one of the following is a working capital management decision?

determining whether to pay cash for a purchase or use the credit offered by supplier

Which one of the following actions by a financial manager is most apt to create an agency problem? a)refusing to borrow money when doing so will create losses for the firm b)refusing to lower selling prices if doing so will reduce the net profits c)refusing to expand the company if doing so will lower the value of the equity d)agreeing to pay bonuses based on the market value of the company stock rather than on sales e)increasing current profits when doing so lowers the value of the firms equity

e) increasing currents profits when doing so lowers the value of the firms equity

Which one of the following statements concerning a sole proprietorship is correct? a) the life of sole proprietorship is potentially unlimited b) a sole proprietor can generally raise large sums of capital quite easily c) transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation d) a sole proprietorship is taxed the same as a C corporation e) it is easy to create a sole proprietorship

e) it is easy to create a sole proprietorship

The growth of both sole proprietorships and partnerships is frequently limited by their:

inability to raise cash

Which one of the following functions should be the responsibility of the controller rather than the treasurer? -daily cash deposit -income tax returns -equipment purchase analysis -customer credit approval -payment to a vendor

income tax returns

A general partner:

is personally responsible for all the partnership debts

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

limited partner

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

limited partnership

Decisions made by financial managers should primarily focus on increasing which one of the following?

market value per share of outstanding stock

Which one of the following best describes the primary advantage of being a limited partner instead of a general partner?

maximum loss limited to the capital invested

Which one of the following parties has ultimate control of a corporation?

shareholders

A business owned by a solitary individual who has unlimited liability for its debt is called a:

sole proprietorship