FINC 303 test 1 ch 1 – Flashcards
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Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:
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Capital structure
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Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as:
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working capital management
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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?
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sole proprietorship
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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 business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?
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general partnership
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When conducting a financial analysis of a firm, financial analysts:
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frequently use accounting information
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Capital budgeting includes the evaluation of which of the following?
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size, timing, and risk of future cash flows
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Which one of the following is a capital structure decision?
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Establishing the preferred debt-equity level
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The daily financial operations of a firm are primarily controlled by managing the:
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working capital
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Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?
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limited partnership
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Which one of the following statements correctly applies to a sole proprietorship?
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Obtaining additional equity is dependent on the owner's personal finances.
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Which one of the following applies to a general partnership?
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Any one of the partners can be held solely liable for all of the partnership's debt.
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In a general partnership, each partner is personally liable for:
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the total debts of the partnership, even if he or she was unaware of those debts.
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Which one of the following is an advantage of being a limited partner?
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Losses limited to capital invested
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Which one of the following statements about a limited partnership is correct?
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There must be at least one general partner
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A corporation:
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is a legal entity separate from its owners
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One advantage of the corporate form of organization is the:
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ability to raise larger sums of equity capital than other organization forms
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corporate shareholders:
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have the ability to change the corporation's bylaws
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The primary goal of financial management is to maximize
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the market value of existing stock
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The primary goal of financial management is most associated with increasing the:
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market value of the firm
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What is the primary goal of financial management for a sole proprietorship?
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maximize the market value of the equity
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The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?
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corporate accounting and financial fruad
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Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
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increase the protections against corporatef ruad
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The Sarbanes-Oxley Act:
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require the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.
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An agency issue is most apt to develop when:
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the control of a firm is separated from the firm's ownership.
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Which one of the following is most apt to align management's priorities with shareholders' interests?
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compensating managers with shares of stock that must be held for a minimum of three years
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Probably the least effective means of aligning management goals with shareholder interests is:
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automatically increasing management salaries on an annual basis.
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One example of a primary market transaction would be the:
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sale of 1,000 shares of newly issued stock by Alt Company to Miquel.
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You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:
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secondary market
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The issuer of a security must be involved in all _____ transactions involving that security.
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primary market
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Which one of the following parties can sell shares of ABC stock in the primary market?
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ABC company
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Which one of the following statements is correct?
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The primary purpose of the NYSE is to match buyers with sellers.
