Chapter 1 Finance

Inflation is assumed to be a temporary problem that does not affect financial decisions FALSE
There is unlimited liability in a general partnership TRUE
Dividends paid to corporate stockholders have already been taxed once as corporate income TRUE
Corporate governance issues have become less important to financial community during the first decade of the new millennium FALSE
A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities and income in their financial statements TRUE
Timing is not a particularly important consideration in financial decision FALSE
Money markets refer to those markets dealing with short-term securities having a life of one year or less TRUE
The primary market includes the sale of securities by way of initial public offerings TRUE
New issues are sold in the secondary market FALSE
Higher return always induces stockholders to invest in a company FALSE
What is the primary goal of financial management? Maximizing shareholder wealth
One major advantages of a sole proprietorship is Lower operating costs.
The partnership form of an organization Avoids the double taxation of earnings and dividends found in the corporate form of organization
Corporate governance is the relationship and exercise of oversight by the board of directors of the company
Agency theory deals with the issue of the conflicts that can arise between the viewpoints and motivations of a firm’s owners and managers
The Sarbanes-Oxley Act was passed in an effort to control corrupt corporate behavior
The major difficulty in most insider-trading cases has been that inside trades have not been legally well defined
When a corporation uses the financial markets to raise new funds, the sale of securities is made in the primary market
Companies that have higher risk than a competitor in the same industry will generally have to pay a higher interest rate than its competitorsa lower relative stock price than its competitorsa higher cost of funds than its competitors
The increase in the internationalization of financial markets has led to companies searching the global financial markets for low cost fundsan increase in the ADRs on the NYSEan increase in debt obligations denominated in foreign currency on US corporate balance sheets

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