Finance Chapter 1

limited liability partnership Which of the following is considered a hybrid organizational form?Sole proprietorship Partnership Corporation Limited liability partnership
someone who has a claim on the cash flows of the firm A stakeholder is:someone geographically close to the firm’s headquarters. someone who has a claim on the cash flows of the firm. some government agency. all of the above.
residual cash flows Cash dividends are paid out of:residual cash flows. liquidated assets. long-term debt. all of the above.
a limited partner Which of the following cannot be engaged in managing the business? A sole proprietor A general partner A limited partner None of the above
a stakeholder If you have loaned capital to a firm, then you could be… a manager. a stakeholder. a partner. all of the above
must be paid within a year Current liabilities are liabilities that:will be converted to cash within a year. must be paid within a year. will be converted to equity within a year. none of the above.
public corporation Which organizational form best enables a firm to sell its securities to the market?Sole proprietorship Private corporation Partnership Public corporation
a manager expensing a lavish dinner on the company expense report An example of an agency cost is:a manager turning down a value-contributing project because of its risks. a manager expensing a lavish dinner on the company expense report. a manager using too little debt within the firm’s capital structure because of the additional risk associated with debt. all of the above.
CPA firm Which of the following is responsible for performing an independent audit of a firm’s financial statements? CPA firm CFO Audit committee CEO
a firm’s cash flows The value of any investment is determined by the cash flows it is expected to generate in the future. Therefore, investors will care about a firm’s cash flows the most. Which of the following matters most to investors when making an investment?A firm’s previous dividend payments A firm’s current ratio A firm’s retained earnings A firm’s cash flows
all of the above Which of the following is a stakeholder? An employee A lender The IRS All of the above
residual cash flows The cash remaining with the firm after paying its operating expenses, making payments to creditors, and taxes is called: capital contributed in excess of par. assets. residual cash flows. earnings per share.
both sole proprietorship and general partnership Which of the following business organizational form(s) subject(s) the owner(s) to unlimited liability? Sole proprietorship General partnership Corporation Both Sole proprietorship and General partnership
owner of a corporation Which of the following owners is protected by limited liability?A sole proprietor A general partner Owner of a corporation None of the above
board of directors Which of the following reports directly to the owners of a firm? (Assume that the firm is a public corporation.) Board of directors Audit committee CFO CEO
there is a significant degree of separation between management and ownership One reason for the existence of agency problems between managers and stockholders is that: there is a significant degree of separation between management and ownership. managers know how to manage the firm better than stockholders. stockholders have unreasonable expectations about managerial performance. none of the above.
a stockholders Who among the following is the principal in the agency relationship of a corporation?A company engineer The CEO of the firm A stockholders The board of directors
greater access to capital markets Shares in a corporation can be sold to raise capital from investors who are not involved in the business. This greatly increases the amount of capital that can be raised to fund the business. Which of the following is the advantage of the corporate form of organization?Reduced start-up costs. Greater access to capital markets.Unlimited liability. Single taxation.
how a firm’s day-to-day financial matters should be managed Working capital management decisions help to determine: how a firm’s day-to-day financial matters should be managed. how a firm should finance its assets. which productive assets a firm should purchase. all of the above.
one in which the benefits of the project are equal to the cost of the asset A good capital budgeting decision is: one in which the benefits of the project are equal to the cost of the asset. one in which the benefits of the project are less than the cost of the asset. one in which the benefits of the project are more than the cost of the asset. all of the above.

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