Finance Flashcards


This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings. Financial management
A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called: risk
This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. financial asset
The most commonly accepted groups of asset classes include all of the following except: Machinery and equipment
Which of the following managers would NOT use finance? All of these would use finance
This type of business organization is entirely legally independent from its owners. Public corporations
The practice generally known as double taxation is due to: corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
For corporations, maximizing the value of owner’s equity can also be stated as: maximizing the stock price.
This should be the primary objective of a firm as it may actually be the most beneficial for society in the long run. Maximizing shareholder value
Which of these are NOT basic approaches to minimizing the agency problem? All of these are basic approaches to minimizing the agency problem.
This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control. Corporate governance
This group is elected by stockholders to oversee management in a corporation. Board of directors
These individuals follow a firm, conduct their own evaluations of the company’s business activities, and report to the investment community. Investment analysts
These individuals help firms access capital markets and advise managers about how to interact with those capital markets. Investment bankers
Which of the following is legal duty between two parties where one party must act in the interest of the other party? Fiduciary
Which of the following can create ethical dilemmas between corporate managers and stockholders? Agency relationship
The opportunity to buy stock at a fixed price over a specific period of time is referred to as: stock options.
The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as: retained earnings.
The overall goal of the financial manager is to: maximize shareholder wealth.
Maximizing owners’ equity value means carefully considering all of the following EXCEPT: how best to increase the firm’s risk.
The agency relationship in corporate finance refers to: when the shareholders hire a manager to run their company.
Which of the following statements is incorrect? Shareholders are responsible for paying off the corporate bonds in the event of a bankruptcy.
From the perspective of control, the best form of business organization is the: sole proprietorship.
Which statement is incorrect regarding hybrid organizations? They offer the same type of control as a sole proprietorship.
Agency problems exist in which forms of business ownership? Corporation
Methods to minimize agency problem include all EXCEPT: allow the CEO to purchase bonds via an employee bond option plan.
The board of directors: are elected by shareholders.
Which of these does NOT act as a monitor of how the firm is being run outside the firm? Members of the board of directors
Corporate stakeholders include all of the following EXCEPT: auditors.
What is the difference in perspective between finance and accounting? Timing
Which of the following statements is correct? Accountants are focused on what happened in the past.

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