Finance Chapter 1

A business owned by a solitary individual who has unlimited liability for its debt is called a: sole proprietorship.
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? agency problem
A stakeholder is: any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.
Which of the following questions are addressed by financial managers?I. How should a product be marketed?II. Should customers be given 30 or 45 days to pay for their credit purchases?III. Should the firm borrow more money?IV. Should the firm acquire new equipment? II, III, and IV only
Which one of the following is a capital structure decision? determining how much debt should be assumed to fund a project
Which of the following accounts are included in working capital management?I. accounts payableII. accounts receivableIII. fixed assetsIV. inventory I, II, and IV only
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 the supplier
Which one of the following business types is best suited to raising large amounts of capital? corporation
Which one of the following best states the primary goal of financial management? maximize the current value per share
The Sarbanes-Oxley Act of 2002 is a governmental response to: management greed and abuses.
Which one of the following actions by a financial manager is most apt to create an agency problem? refusing to expand the company if doing so will lower the value of the equity????
Which form of business structure is most associated with agency problems? corporation
Which one of the following is an agency cost? hiring outside accountants to audit the company’s financial statements??
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
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction: was facilitated in the secondary market.

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