Finance Chapters 1 – 4

The term used to describe the study of means by which a manager can determine which long term investments to pursue, how to pay for those investments, and how to manage the daily finances of the firm: Business finance
The top financial officer in a firm is commonly referred to as the: Chief financial officer
The person who is in charge of cash management and capital expenditures is called: Treasurer
The process of managing a firm’s long-term investments is called: Capital budgeting
The amount of debt and equity used by a firm to finance its operations is called the firm’s: Capital structure
Short-term assets and short-term liabilities are referred to as the firm’s: Working capital
The management of a firm’s cash, inventory, and payables is referred to as: Working capital management
A sole proprietorship is defined as a business: That is owned by a single individual.
A business organization that is similar to a sole proprietorship but has two or more than owners is called a: Partnership
The document which specifies how net profits and losses are to be divided among two or more individual owners, who are personally liable for the firm’s debts, is called: A partnership agreement
A business entity which treated as a legal”person” is called a: Corporation
The legal papers which designate a firm’s name, nature of business, and intended life are called the: Articles of incorporation
The rules which outline how a corporation will regulate itself are referred to as the: Bylaws
Any situation where a potential conflict can arise between the firm’s owners and its managers is referred to as a(n): agency problem
Anyone other than the firm’s stockholders or creditors that might have a claim on the cash flows of a firm is called a: Stakeholder
The primary market refers to: The original sale of securities by the issuer.
The market for trading securities after the original sale is called the: Secondary market
The sale of securities to the general public by the issuer is known as a: Public offering
A negotiated sale of securities by an issuer to a specific buyer is called a(n): Private placement
Over the counter markets are Dealer markets
A securities market with a physical location that is designed to match buyers with sellers is called a(n) Auction market
When a company qualifies to have its securities traded on a particular exchange the stock of the company is said to be : Scheduled with the exchange.
Which of the following questions falls into the financial topic of investments? What are the risks involved owning a particular security?
Which of the following are considered financial institutions: Bank, hospital, insurance company, or home builder? Bank and insurance company
Which of the following are careers in finance: Insurance agent, security analyst, portfolio manager, corporate treasurer? All.
Business finance addresses which one of the following questions? Which long-term assets should a firm acquire?
Which of the following functions should be assigned to the controller rather than the treasurer? Data processing
Which one of the following statements is correct concerning the organizational chart of a corporation? The tax manager generally reports to the controller rather than the treasurer.
The purpose of capital budgeting is to: Identify assets that produce value in excess of their cost.
Which one of the following statements is related to capital budgeting? A firm should consider the size, risk, and timing of an asset’s cash flows before deciding to purchase that asset.
When a firm decides to borrow money rather than issue stock to raise funds for a new project, the company is making a (n): Capital structure decision.
The capital structure of a firm refers to the firm’s: Long-term debt and equity.
Working capital management includes which of the following; controlling the inventory level, determining when to pay suppliers, deciding how much long-term debt to assume, or controlling the amount of cash that is readily available: Controlling the inventory level, determining when to pay suppliers, and controlling the amount of cash that is readily available.
The daily financial operations of a firm are primarily controlled by managing the Working capital of the firm.
A sole proprietor: Assumes personal liability for all of the debts of the business.
The most widely used form of business entity in the U.S. is the: Sole proprietorship
Under a general partnership: Each partner receives only a proportionate share of the profits but is responsible for 100% of the partnership debts.
In a general partnership, each general partner is personally liable for: The total debts of the partnership, even if he or she was unaware that said debts were incurred.
The advantage of being a limited partner in a limited partnership is the ability to: Invest in a partnership while limiting your losses to the amount you invested.
Which one of the following statements about a limited partnership is correct? A limited partnership can sell his or her interest without the partnership dissolving.
A corporation: May be considered a resident of an individual state.
The bylaws of a corporation include information such as the: Method by which directors are elected.
The primary advantages of a limited liability company are the: Means of taxation and the limits on the liabilities assumed by the owners.
The general purpose of a limited liability company is to: Be taxed like a partnership and provide limited liability for the owners.
The primary goal of financial management is to maximize the: Market value of the existing stock.
Which of the following actions best matches the primary goal of financial management? Increasing the market value of the equity by improving the efficiency of operations.
Which of the following situations is most apt to create an agency problem? A manager receives a bonus because he or she has hired the most new employees in the past year.
An agency problem frequently exists in situations where there is a separation of: Company ownership and company management.
The control of a corporation ultimately lies with the: Company stockholders
The Sarbanes Oxley act: Makes the officers of a public corporation personally responsible for the firm’s financial statements.
Which of the following transactions occurs in the primary market? POQ sells new shares of POQ to Frederico.
If you purchase 100 shares if GE stock on the NYSE today, the transaction is most likely occurring: In the secondary market.
Which of the following statements is correct concerning the secondary market? Secondary markets can be either dealer or auction markets.
Which of the following are characteristics of a dealer market? Buyers purchase securities for themselves at their own risk and transactions are done electronically without there being a physical location.
NASDAQ is: An over the counter market.
All large company stocks such as GE and Microsoft: Can trade on the exchange of their choosing as long as they qualify for listing.
Which one of the following statements is correct concerning the financial markets in the U.S.? The NYSE lists significantly less companies than does NASDAQ.
The financial markets in the U.S.: Transact trades in both the primary and secondary markets.

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