Fin Chapter 1

Limited liability companies are primarily designed to:
provide limited liability while avoiding double taxation.
Which one of the following statements about a limited partnership is correct?
There must be at least one general partner.
Which one of the following applies to a general partnership?
Any one of the partners can be held solely liable for all of the partnership’s debt.
Which one of the following is a capital structure decision?
Establishing the preferred debt-equity level
Which one of the following is most apt to align management’s priorities with shareholders’ interests?
Compensating managers with shares of stock that must be held for three years before the shares can be sold
Jamie is employed as a commercial loan officer for a regional bank centered in the midwestern section of the U.S. Her job falls into which one of the following areas of finance?
Financial institutions
The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990s?
Corporate accounting and financial fraud
Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?
Limited partnership
The potential conflict of interest between a firm’s owners and its managers is referred to as which type of conflict?
Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability for the firm’s debts?
General Partnership
Which one of the following is an advantage of being a limited partner?
Losses limited to capital invested
Margie opened a used bookstore and is both the 100 percent owner and the store’s manager. Which type of business entity does Margie own if she is personally liable for all the store’s debts?
Sole Proprietorship
Which one of the following functions should be assigned to the treasurer rather than the controller?
Cash management
Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm’s:
capital structure.
The goal of financial management is to increase the:
current market value per share.
The daily financial operations of a firm are primarily controlled by managing the:
working capital
In a general partnership, each partner is personally liable for:
the total debts of the partnership, even if he or she was unaware of those debts.
A limited liability company:
prefers its profits be taxed as personal income to its owners.
The Sarbanes-Oxley Act of 2002 has:
made officers of publicly traded firms personally responsible for the firm’s financial statements.
Todd and Cathy created a firm that is a separate legal entity and will share ownership of that firm on a 50/50 basis. Which type of entity did they create if they have no personal liability for the firm’s debts?
Corporate shareholders:
have the ability to change the corporation’s bylaws.
Which one of the following statements correctly applies to a sole proprietorship?
Obtaining additional equity is dependent on the owner’s personal finances.
Which one of the following best matches the primary goal of financial management?
Increasing the market value of firm
If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?
A corporation:
is a legal entity separate from its owners.
Which one of the following is most apt to create a situation where an agency conflict could arise?
Separating management from ownership

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