Finance Flashcards

Finance Chapter 1

The corporate controller is generally responsible for which one of these functions Tax Reporting
The corporate treasurer oversees which one of these areas? Financial planning
A firms capital structure refers to the firms proportions of financing from current and long term debt and equity
Short-term finance deals with: the timing of cash flows
Which one of these best fits the description of an agency Cost? The payment required for an outside audit of the firm
Which one of these accounts is included in net working capital? Inventory
Financial managers primarily create firm value by: investing in assets that generate cash in excess to their cost.
Which one of these is a cash outflow from a corporation? Dividend Payment
for a firm to create value it must create more cash flow than it uses
If a firm is currently profitable, then: its reported sales exceed its costs
Which one of these statements is correct? The value of an investment by a firm depends on the size, the timing, and the risk of the investment’s cash flows
The ultimate control of a corporation lies in the hands of the corporate: Stockholders
The process of planning and managing a firm’s long-term assets is called: Capital budgeting
A business owned by a single individual is called a: Sole proprietorship
A business formed by two or more individuals who each have unlimited personal liability for all of the firm’s debts is called a: General Partnership
The understanding of the work and cash to be contributed to a partnership by each member of that partnership is formalized in the: Partnership agreement
A business created as a distinct legal entity is called a: corporation
Which corporate document sets forth the number of members on the original board of directors? Articles of incorporation
The rules by which corporations govern themselves are called: Bylaws
A business entity operated and taxed like a partnership, but with limited liability for owners, is called Limited liability company
The primary goal of financial management is to: maximize the current value per share of the existing stock
A conflict of interest between the stockholders and management of a firm is referred to as the: agency problem
Agency costs refer to: the costs of any conflicts of interest between stockholders and management.
A stakeholder is any person or entity: other than a stockholder or creditor who potentially has financial interest in the firm
One intent of the Sarbanes Oxley Act of 2002 is to: Protect investors from corporate abuses
The treasurer and the controller of a corporation generally report to the: Chief Executive Officer
Which one of the following statements is correct concerning the organizational structure of a corporation? the controller reports to the chief executive officer
Which one of the following is a capital budgeting decision? deciding whether or not a new production facility should be built
Which one of the following statements concerning a sole proprietorship is correct? the owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts
which one of the following best describes the primary advantage of being a limited partner rather than a general partner Liability for firm debts is limited to the capital invested
A general partner: can end the partnership by withdrawing.
A partnership: creates an unlimited liability for all partners for the partnership debts
One advantage of a partnership is the: relatively low formation cost
one disadvantage of the corporate form of business ownership is the: double taxation of profits
Which one of the following statements is correct? Sole proprietorship and partnerships are taxed in a similar fashion
The articles of incorporation: set fourth the number of shares of stock that can be issued
Corporate bylaws: establish the rules by which the firm regulates its existence
the owners of a limited liability company generally prefer: being taxed personally on all business income
Which one of the following business types is best suited to raising large amounts of capital? corporation
Financial managers should primarily strive to: maximize the current value per share of existing stock
The decisions made by financial managers should all be ones which increase the: Market value of existing owners equity
Which one of the following is least apt to help convince managers to work in the best interest of the stockholders? pay raises based on length of service
which form of business structure faces the greatest agency problems? corporation
A proxy fight occurs when: a group solicits voting rights to replace the board of directors
which one of the following parties is considered a stakeholder of a firm customer
Sarbanes-Oxley Act requires public corporations to: list any deficiencies in internal controls
Insider trading is: Prohibited by the securities act of 1934
Basic regulatory framework for the public trading of securities in the united states was provided by the: Securities Act of 1933 and the securities exchange act of 1934
the securities Act of 1933 focuses on: the issuance of new securities
Accounting profits and cash flows are generally: different because of GAAP rules regarding the recognition of income
The chief operations officer typically reports directly to the: Chief executive officer

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