Upgrade to remove ads
Only $35.99/year

Business Finance Ch 1

Terms in this set (64)

What three subjects is the financial manager concerned with?
Capital Budgeting, Capital Structure, Working Capital Management
Which corporate officer is responsible for managing the firm's cash?
Treasurer
Which of the following is NOT one of the basic areas of finance?
Personal Finance
Which term applies to the mixture of debt and equity maintained by a firm?
Capital Structure
Capital budgeting is concerned with making and managing expenditures on _____.
long-term assets
Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of __________ management.
working capital
The controller is responsible for which of the following tasks?
Tax reporting and payments
Financial accounting
Which of these topics is not of especial interest to a financial manager?
Debt
Which of the following are true of a sole proprietorship?
A proprietorship has a limited life.
It is one of the simplest types of businesses to form.
A treasurer's responsibilities typically include:
managing capital expenditure decisions.
making financial plans.
handling cash flows.
Which of the following are included in a firm's capital structure?
Long Term Debt and Equity
Working capital includes which of the following?
inventory
short-term assets
cash
The ______ office is responsible for corporate tax reporting.
controller
A sole proprietor has ______ personal liability for all business debts and obligations.
unlimited
The officer responsible for managing the firm's cash flows is the ______.
treasurer
A business without separate legal authority formed by two or more people is known as a _____.
partnership
Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of __________ management.
working capital
Which corporate officer is responsible for accurate financial accounting of the firm's activities?
controller
A general partnership has which of the following characteristics?
Each owner has unlimited liability for all firm debts.
All the partners share in gains or losses of the partnership.
A sole proprietorship is a business that _______.
is owned by one person
In a limited partnership, a limited partner's liability for business debts is ______.
limited to their cash contribution to the partnership
A partnership must have at least ____ owners
two
Why don't large businesses organize as sole proprietorships or partnerships?
It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow.
Which of the following are reasons that the corporation is the most important form of business?
Corporations are separate legal entities.
Corporations can enter contracts.
Corporations can sue and be sued.
An organization must prepare ______ and bylaws when forming a corporation.
articles of incorporation
A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a:
general partnership
True or false: In a large corporation, stockholders and managers are usually separate groups.
True
What type of partnership involves both general and limited partners to run the business?
Limited Partnership
A corporation borrows money in its own name.
True
Which of the following is a disadvantage of sole proprietorships and partnerships?
Difficulty of transferring ownership
Since ________ and ownership are separated, a corporation's life is unlimited.
management
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling shares of stock.
When a corporation is formed, it is granted which of the following rights?
The ability to issue stock
Legal Power To Sue
When are corporate profits taxed?
Corporations pay taxes on corporate profits.
Individuals pay taxes on corporate dividends.
The owners of a corporation are called ______.
shareholders
Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts.
limited
Corporations in other countries are often called:
Limited liability company
Public limited companies
Joint stock companies
How is ownership of a corporation represented?
Shares of stock
True or False: "Profit maximization" is the goal for the management of a corporation in short-run only.
False
The federal government taxes which of the following?
Corporate earnings and shareholder dividends
What is the main goal of financial management?
To maximize current share value
A limited liability company's owners have ______ liability.
limited
Public limited companies and joint stock companies are other names for __________
corporations
Is profit maximization the primary objective of a business?
No; profit maximization may not take into account other strategic objectives necessary to maximize shareholder value.
In a for-profit business, owners' equity is equivalent to
the total value of stock in a corporation
The goal of the financial management is to increase the value of _____.
the existing shares of stock
A limited liability company is taxed like a _________, but retains ________ ________ for owners.
partnership; limited liability
A bad financial decision is defined as a decision that ______ shareholder wealth.
decreases
The Sarbanes-Oxley Act is intended to strengthen protection against:
corporate accounting fraud and financial malpractice
The goal of a "for profit" business is to ______ the value of shareholder wealth.
maximize
"Increasing shareholder wealth" means increasing the _________.
current common stock value
How does the Sarbanes-Oxley Act primarily work to make sure that companies tell the truth in financial statements?
It makes management personally responsible for the accuracy of a company's financial statements.
A good financial decision will do which of the following?
Increase the value of the firm's existing stock
Increase market value of shareholders' equity
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley?
Tyco, Eron, WorldCom
True or false: The Sarbanes-Oxley Act provides incentives for companies to go public in US markets.
false
A corporation receives cash from financial markets by selling ______ and ______.
stocks and bonds
When one owner or creditor sells to another, the transaction takes place in the _________ market
secondary
The Sarbanes-Oxley Act requires corporate officers to:
confirm the validity of the financial statements
be responsible for errors in the annual report
The New York Stock Exchange is a(n) _____.
auction market
Which of these have been noted as unintended consequences of the Sarbanes-Oxley Act?
public firms "going dark" and leaving the stock market
eliminating public disclosure for many firms
firms going public outside of the U.S. market
According to Figure 1.2, where does cash generated by a corporation typically go?
To pay corporate taxes
Reinvested in the firm
Paid to shareholders and creditors
Which of the following are defining features of the primary market?
Proceeds from the sale of securities goes to the issuing firm
It is the market where initial public offerings are made
In an over-the-counter market, which of the following is true?
Many dealers are also connected electronically.
Most of the buying and selling is done by the dealer
What is the primary objective of an auction market?
To bring buyers and sellers together
Students also viewed