Fin 323 Ch. 1 – Flashcards
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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. options b. standard deviation c. coefficient of variation c. risk
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risk
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This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. a. investment b. financial asset c. real asset d. financial markets
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financial asset
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Which of the following is the firm's highest-level financial manager? a. Chief Executive Officer b. Chief Financial Officer c. Board of Directors d. Corporate Governance
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Chief Financial Officer
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Which of the following managers would NOT use finance? a. Operational managers b. Marketing managers c. Human resource managers d. All of these would use finance.
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All of these would use finance
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Which of the following personal decisions is NOT impacted by finance? a. Borrowing money to purchase cars or homes b. Making credit card payments c. Making retirement decisions d. All of these are impacted by finance.
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All of these are impacted by finance
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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
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The physical location of the business
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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 proprietorship b. Partnership c. Corporation d. Hybrid organization
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Sole proprietorship
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This type of business organization is legally independent entirely from its owners. a. Sole proprietorship b. Partnership c. Public Corporations d. Hybrid organizations
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Public Corporations
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Which of the following is NOT considered a hybrid organization? a. S Corporation b. Limited Liability Partnership c. Limited Liability Company d. Limited Partnership e. All of these are considered hybrid organizations.
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All of these are considered hybrid organizations.
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The practice generally known as double taxation is due to a. 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.
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corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
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As individual legal entities, corporations assume liability for their own debts, so the shareholders hold a. only limited liability. b. unlimited liability. c. shared liability. d. joint liability.
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only limited liability.
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For corporations, maximizing the value of owner's equity can also be stated as a. maximizing retained earnings. b. maximizing earnings per share. c. maximizing net income. d. maximizing the stock price.
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maximizing the stock price.
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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 layoffs b. Maximizing market share c. Minimizing costs d. Maximizing shareholder value
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Maximizing shareholder value
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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.
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All of these are basic approaches to minimizing the agency problem.
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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.
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Offer the managers an equity stake in the firm.
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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 theory b. corporate governance c. defined benefit plan d. invisible hand
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corporate governance
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This group is elected by stockholders to oversee management in a corporation. a. Chief Counselors b. Chief Executives c. Board of Directors d. Auditors
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Board of Directors
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Between corporate managers and stockholders, this can create ethical dilemmas. a. Agency relationship b. Auditors c. Boards of Directors d. Venture capitalist
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Agency relationship
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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 earnings b. Venture capital c. Retained earnings d. Institutional investment
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Retained earnings
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An employee stock option plan is ________________. a. A perk usually only given to the board of directors as compensation b. A plan that only partnerships can use to defer compensation to partners c. A way to align the interests of employees with those of the owners d. None of these answers are correct.
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A way to align the interests of employees with those of the owners
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The overall goal of the financial manager is to _________________. a. Minimize total costs b. Maximize net income c. Maximize earnings per share d. Maximize shareholder wealth
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Maximize shareholder wealth
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Maximizing owners' equity value means carefully considering all of the following except _______. a. How to best bring additional funds into the firm b. Which projects to invest in c. How best to increase the firm's risk d. How best to return the profits from those projects to the owners over time
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How best to increase the firm's risk
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The agency relationship in corporate finance refers to _______________________. a. when the shareholders hire a manager to run their company b. when the corporate hires an advertising agency to market their new product/service c. when the board of directors are elected to staggered terms d. when the board of directors oversee the CEO
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when the shareholders hire a manager to run their company
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The most common type of business in the United States is the __________. a. Corporation b. Partnership c. Sole Proprietorship d. Hybrid organization such as a limited liability company
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Sole Proprietorship
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The biggest disadvantage of the sole proprietorship is _________________. a. Unlimited liability b. Double taxation c. Limited access to capital d. Total control
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Unlimited liability
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Financial management involves decisions about: a. which projects to fund b. how to minimize taxation c. what type of capital to be raised d. all of the above
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all of the above
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Who is buried in grants tomb?
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Grant
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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. dividends b. retained earnings c. taxes d. none of the above
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dividends
