Fin 323 Ch. 1

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 _________.a. optionsb. standard deviationc. coefficient of variation c. risk risk
This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.a. investmentb. financial assetc. real assetd. financial markets financial asset
Which of the following is the firm’s highest-level financial manager?a. Chief Executive Officerb. Chief Financial Officerc. Board of Directorsd. Corporate Governance Chief Financial Officer
Which of the following managers would NOT use finance?a. Operational managersb. Marketing managersc. Human resource managersd. All of these would use finance. All of these would use finance
Which of the following personal decisions is NOT impacted by finance?a. Borrowing money to purchase cars or homesb. Making credit card paymentsc. Making retirement decisionsd. All of these are impacted by finance. All of these are impacted by finance
When determining a form of business organization, all of the following are considered EXCEPT:a. Who owns the firm.b. What are the owners’ risks.c. What are the tax ramifications.d. The physical location of the business The physical location of the business
This type of business organization is relatively easy to start, and it is subject to much lighter regulatory and paperwork burden than other business forms.a. Sole proprietorshipb. Partnershipc. Corporationd. Hybrid organization Sole proprietorship
This type of business organization is legally independent entirely from its owners. a. Sole proprietorshipb. Partnershipc. Public Corporationsd. Hybrid organizations Public Corporations
Which of the following is NOT considered a hybrid organization?a. S Corporationb. Limited Liability Partnershipc. Limited Liability Companyd. Limited Partnershipe. All of these are considered hybrid organizations. All of these are considered hybrid organizations.
The practice generally known as double taxation is due toa. shareholders’ dividends being taxed at both the federal and state levels.b.corporate income being taxed at both the federal and state levels.c.interest on shareholders’ dividends being taxed as income.d. corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends. corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
As individual legal entities, corporations assume liability for their own debts, so the shareholders holda. only limited liability.b. unlimited liability.c. shared liability.d. joint liability. only limited liability.
For corporations, maximizing the value of owner’s equity can also be stated asa. maximizing retained earnings.b. maximizing earnings per share.c. maximizing net income.d. maximizing the stock price. 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.a. Minimizing layoffsb. Maximizing market sharec. Minimizing costsd. Maximizing shareholder value Maximizing shareholder value
Which of these are NOT basic approaches to minimizing the agency problem?a. Just ignore the conflict of interest.b. Monitor managers’ actions.c. Align managers’ personal interest with those of the owners by making the managers owners.d. All of these are basic approaches to minimizing the agency problem. All of these are basic approaches to minimizing the agency problem.
Which of the following is an example of aligning managers’ personal interests with those of the owners?a. Allow the managers to have as many perks as they request.b. Pay the managers high salaries.c. Offer the managers an equity stake in the firm.d. Trust the managers’ actions as they will always act in the owners’ best interest. Offer the managers an equity stake in the firm.
This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control.a. agency theoryb. corporate governancec. defined benefit pland. invisible hand corporate governance
This group is elected by stockholders to oversee management in a corporation.a. Chief Counselorsb. Chief Executivesc. Board of Directorsd. Auditors Board of Directors
Between corporate managers and stockholders, this can create ethical dilemmas.a. Agency relationshipb. Auditorsc. Boards of Directorsd. Venture capitalist Agency relationship
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 _______________.a. Restricted earningsb. Venture capitalc. Retained earningsd. Institutional investment Retained earnings
An employee stock option plan is ________________.a. A perk usually only given to the board of directors as compensationb. A plan that only partnerships can use to defer compensation to partnersc. A way to align the interests of employees with those of the ownersd. None of these answers are correct. A way to align the interests of employees with those of the owners
The overall goal of the financial manager is to _________________.a. Minimize total costsb. Maximize net incomec. Maximize earnings per shared. Maximize shareholder wealth Maximize shareholder wealth
Maximizing owners’ equity value means carefully considering all of the following except _______.a. How to best bring additional funds into the firmb. Which projects to invest inc. How best to increase the firm’s riskd. How best to return the profits from those projects to the owners over time How best to increase the firm’s risk
The agency relationship in corporate finance refers to _______________________.a. when the shareholders hire a manager to run their companyb. when the corporate hires an advertising agency to market their new product/servicec. when the board of directors are elected to staggered termsd. when the board of directors oversee the CEO when the shareholders hire a manager to run their company
The most common type of business in the United States is the __________.a. Corporationb. Partnershipc. Sole Proprietorshipd. Hybrid organization such as a limited liability company Sole Proprietorship
The biggest disadvantage of the sole proprietorship is _________________.a. Unlimited liabilityb. Double taxationc. Limited access to capitald. Total control Unlimited liability
Financial management involves decisions about:a. which projects to fundb. how to minimize taxationc. what type of capital to be raisedd. all of the above all of the above
Who is buried in grants tomb? Grant
Not all cash a company generates will be returned to the investors. Which of the following will not reduce the amount of capital returned to the investors?a. dividendsb. retained earningsc. taxesd. none of the above dividends

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