Finance 3715 Chapter 1 – Flashcards
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Which one of the following terms is defined as the management of a firm's long-term investments?
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capital budgeting
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Which one of the following terms is defined as the mixture of a firm's debt and equity financing?
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capital structure
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Which one of the following is defined as a firm's short-term assets and its short-term liabilities?
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working capital
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A business owned by a solitary individual who has unlimited liability for its debt is called a:
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sole proprietorship
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A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:
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general partnership
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A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:
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limited partner
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A business created as a distinct legal entity and treated as a legal "person" is called a:
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corporation
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Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
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agency problem
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A stakeholder is:
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any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.
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Which of the following questions are addressed by financial managers? I. How should a product be marketed? II. Should customers be given 30 or 45 days to pay for their credit purchases? III. Should the firm borrow more money? IV. Should the firm acquire new equipment?
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II, III, and IV only
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Which one of the following functions should be the responsibility of the controller rather than the treasurer?
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income tax returns
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The controller of a corporation generally reports directly to the:
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vice president of finance
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Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?
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the treasurer reports to the vice president of finance
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Which one of the following is a capital budgeting decision?
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deciding whether or not to purchase a new machine for the production line
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Which of the following should a financial manager consider when analyzing a capital budgeting project? I. project start up costs II. timing of all projected cash flows III. dependability of future cash flows IV. dollar amount of each projected cash flow
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I, II, III, and IV
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Which one of the following is a capital structure decision?
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determining how much debt should be assumed to fund a project
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The decision to issue additional shares of stock is an example of which one of the following?
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capital structure decision
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Which of the following accounts are included in working capital management? I. accounts payable II. accounts receivable III. fixed assets IV. inventory
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I, II, and IV only
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Which one of the following is a working capital management decision?
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determining whether to pay cash for a purchase or use the credit offered by the supplier
