Finance Q’s ch 1

Which one of the following terms is defined as the management of a firm’s long-term investments? capital budgeting
Which one of the following terms is defined as the mixture of a firm’s debt and equity financing? capital structure
Which one of the following is defined as a firm’s short-term assets and its short-term liabilities? working capital
A business created as a distinct legal entity and treated as a legal “person” is called a: corporation
Which of the following questions are addressed by financial managers? 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?
Which one of the following is a capital budgeting decision? deciding whether or not to purchase a new machine for the production line
Which one of the following is a capital structure decision? determining how much debt should be assumed to fund a project
The decision to issue additional shares of stock is an example of which one of the following? capital structure decision
Which one of the following statements concerning a sole proprietorship is correct? The owner of a sole proprietorship is personally responsible for all of the company’s debts.
Which of the following are advantages of the corporate form of business ownership? I. limited liability for firm debtIII. ability to raise capitalIV. unlimited firm life
Which one of the following best states the primary goal of financial management? maximize the current value per share
Which one of the following actions by a financial manager is most apt to create an agency problem? increasing current profits when doing so lowers the value of the firm’s equity
Which one of the following is least likely to be an agency problem? increasing the market value of the firm’s shares
Which one of the following is a primary market transaction? sale of a new share of stock to an individual investor
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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