Finc 311- Chapter 1
partnership; limited liability
A limited liability company is taxed like a _________, but retains ________ ________ for owners.
The Sarbanes-Oxley Act requires corporate officers to:
-confirm the validity of the financial statements -be responsible for errors in the annual report
Limited
A limited liability company's owners have ______ liability.
General Partnership
A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a:
articles of incorporation
An organization must prepare ______ and bylaws when forming a corporation.
long-term assets
Capital budgeting is concerned with making and managing expenditures on _____.
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
The federal government taxes which of the following?
Corporate earnings and shareholder dividends
Which of the following is a disadvantage of sole proprietorship and partnerships?
Difficulty of transferring ownership
According to the textbook, which of the following is not one of the three main questions to be addressed if you wanted to start your own business?
How many employees will I need? NEEDED: -Where will long-term financing be obtained to pay for investments? (Capital structure decisions) -What long-term investments should be made? (Capital budgeting decisions) -How will everyday financial activities be handled? (Working capital management)
In a shareholder-manager relationship, who is the agent?
Management
corporations
Public limited companies and joint stock companies are other names for __________.
Partnership
A business without separate legal authority formed by two or more people is known as a _____.
Unlimited Liability
A sole proprietor has ______ personal liability for all business debts and obligations.
The relationship between stockholders and management can best be described as a(n) ______ relationship.
agency relationship
A general partnership has which of the following characteristics?
-Each owner has unlimited liability for all firm debts. -All the partners share in gains or losses of the partnership.
Which of the following are included in a firm's capital structure?
-Equity -Long-term debt
When are corporate profits taxed?
-Individuals pay taxes on corporate dividends. -Corporations pay taxes on corporate profits.
When a corporation is formed, it is granted which of the following rights?
-Legal powers to sue -The ability to issue stock
Which of the following are included in a firm's capital structure?
-Long-term debt -Equity
The controller is responsible for which of the following tasks?
-Tax Reporting and Payments -Financial Accounting
Which of the following are key questions for investments? Select all that apply.
-What is the best mixture of financial assets to hold? -What determines the price of a financial asset? -What are the risks and rewards associated with investing?
Business finance is broadly concerned with which of the following (select all that apply)?
-Which long-term investment to make -How to finance long-term investments -How to manage day-to-day finances of the firm
Capital budgeting is concerned with making and managing expenditures on _____.
-current assets -current liabilities -long-term liabilities
Which of these have been noted as unintended consequences of the Sarbanes-Oxley Act?
-eliminating public disclosure for many firms -public firms "going dark" and leaving the stock market -firms going public outside of the U.S. market
A treasurer's responsibilities typically include:
-handling cash flows. -managing capital expenditure decisions. -making financial plans.
Corporations in other countries are often called:
-public limited companies -joint stock companies -limited liability company
stakeholder
A(n) ______ is someone other than an owner or a creditor who potentially has a claim on the cash flows of the firm.
Limited
Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts.
Which of these topics is not of especial interest to a financial manager?
Debt
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley?
Enron, Tyco, WorldCom
Working Capital
Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of __________ management.
Which of the following are considered non-owner stakeholders in a company?
Government Employees Suppliers
Agency problem
If you hire a real estate company to sell your house, you are most apt to encounter which one of the following?
Working capital includes which of the following?
Inventory, short-term assets, cash
The four basic areas of finance include
Investments, financial institutions, international finance, and corporate finance
Why don't large businesses organize as sole proprietorship or partnerships?
It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow.
Is profit maximization the primary objective of a business?
No; profit maximization may not take into account other strategic objectives necessary to maximize shareholder value.
Financial Assets
One of the important questions in the area of investments includes the potential risks and reward associated with investing in
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling shares of stock.
Which one of these is an important mechanism used by unhappy stockholders to replace current management?
Proxy Fight
Why would the threat of a takeover motivate a manager to act in stockholders' interest?
Running the firm well and acting in the stockholders' interest makes the firm a less attractive takeover target to begin with.
management
Since ________ and ownership are separated, a corporation's life is unlimited.
A shareholder's liability is limited to which of these?
The amount the shareholder invested in the corporation
agency problem.
The conflict of interest between an agent and a principal is called a(n)
Agency Cost
The costs incurred due to a conflict of interest between stockholders and management are called ______ costs.
the existing shares of stock
The goal of the financial management is to increase the value of _____.
Shareholders
The owners of a corporation are called ______.
a takeover
The threat of ______ motivates managers to make good decisions.
What is the main goal of financial management?
To maximize current share value
The officer responsible for managing the firm's cash flows is the ______.
Treasurer
Which corporate officer is responsible for managing the firm's cash?
Treasurer
Which of the following positions generally report to the chief financial officer (CFO)?
Treasurer, controller
A corporation borrows money in its own name.
True
False
True or False: "Profit maximization" is the goal for the management of a corporation in short-run only.
Limited Partnership
What type of partnership involves both general and limited partners to run the business?
Controler
Which corporate officer is responsible for accurate financial accounting of the firm's activities?
Capital Structure
Which term applies to the mixture of debt and equity maintained by a firm?
stockholders
Who elects the board of directors, and ultimately maintains control of the firm?
What three subjects is the financial manager concerned with?
Working Capital management Capital Structure Capital Budgeting
Capital Budgeting
______ budgeting is the process of planning and managing a firm's long-term assets.
Stock options
_______ ______ can be used to encourage managers to maximize the value of the stock.
A sole proprietorship is a business that _______.
is owned by one person
Captial Budgeting
is the process of planning and managing a firm's long-term assets.
In a limited partnership, a limited partner's liability for business debts is ______.
limited to their cash contribution to the partnership
Capital budgeting is concerned with making and managing expenditures on _____.
long-term assets