finance chapter 1 Answers – Flashcards
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inflation is assumed to be a temporary problem that does not affect financial decisions
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false
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the internet impacts e-commerce by creating a mechanism for improved communications between a business, its customers, and its suppliers
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true
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the sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs
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true
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in terms of revenues and profits, the corporation is by far the most important form of business organization in the US
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true
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The partnership form of an organization
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avoids the double taxation of earnings and dividends found in the corporate form of organization
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a corporation is
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owned by stockholders who enjoy the privilege of limited liability, easily divisible between owners, and a separate legal entity with perpetual life
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when a corporation uses the financial markets to raise new funds, the sale of securities is made in the
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primary market
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one of the major advantages of a sole proprietorship is
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low operating costs
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what is the primary goal of financial management
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maximizing shareholder wealth
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Proper risk-return management means that
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the firm must determine an appropriate trade-off between risk and return
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agency theory examines the relationship between the
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owners of the firm and the managers of the firm
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agency problems are least likely to arise in which organizational form?
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sole proprietorship
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the sarbanes-oxley act was passed in an effort to
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control corrupt corporate behavior
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money markets would include which of the following securities?
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treasury bills and commercial paper
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one of the major disadvantages of a sole proprietorship is
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that there is unlimited liability to the owner
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in the past, the study of finance has included
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mergers and acquisitions, raising capital, and bankruptcy
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With a Subchapter S corporation
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income is taxed as direct income to stockholders
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agency theory would imply that conflicts are more likely to occur between management and shareholders when
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the chairman of the board is also the Chief executive officer (CEO)
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The Sarbanes-oxley act set up the public company accounting oversight board with the responsibility for all of the following except
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certifying the competence of financial executives
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financial capital
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money
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real capital
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long-term plant and equipment
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financial markets
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meeting place for people, corporations, and institutions that either need money or have money to lend or invest
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money markets
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refer to those markets dealing with short-term securities that have a life of one year or less
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capital markets
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markets where securities have a life of more than one year
