Finance 303 - Financial Management » Fall 2022 » Ch1 Assignment
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Question #1
What is NOT a characteristic of a shareholder?
A.
Expects to receive dividends.
B.
Expects to receive interest.
C.
Expects to have rights as defined in the corporation's charter and bylaws.
D.
Expects to receive a capital gain on their investment.
Question #2
Which of the following business organizational forms is/are the easiest one(s) to raise capital?
A.
Sole proprietorship
B.
Both Sole proprietorship and Partnership
C.
Partnership
D.
Corporation
Question #3
Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations?
A.
Private corporation
B.
Sole proprietorship
C.
Partnership
D.
Public corporation
Question #4
Which of the following is considered a hybrid organizational form?
A.
Limited liability partnership
B.
Sole proprietorship
C.
Corporation
D.
Partnership
Question #5
From the owner’s perspective, which of the following should be the goal of a firm?
A.
Stockholders' wealth maximization
B.
Tax minimization
C.
Profit maximization
D.
Revenue maximization
Question #6
One reason for the existence of agency problems between managers and stockholders is that:
A.
None of these
B.
managers know how to manage the firm better than stockholders.
C.
management is separate from ownership.
D.
stockholders have unreasonable expectations about managerial performance.
Question #7
_____ has (have) a legal responsibility to represent stockholders’ interests.
A.
A CEO
B.
A corporation’s board of directors
C.
A chairman
D.
All of these
Question #8
One of the best ways to reduce agency conflict is by
A.
instituting severe penalties for bad decisions.
B.
having managers report to the board of directors.
C.
hiring outside monitors to keep track of the managers’ decisions.
D.
designing an effective compensation package.
Question #9
Which of the following is an example of frivolous agency costs?
A.
Providing lunch for the employees.
B.
Investment in Land & Buildings.
C.
Excessive perks.
D.
Hiring external auditors to certify accounting statements despite having internal auditors.
Question #10
A benefit of the corporate form of business is the
A.
flow-through taxation.
B.
limited liability of owners.
C.
tax exemption of dividends.
D.
easiness to start.
Question #11
Net working capital is the:
A.
difference between total assets and current assets.
B.
difference between current assets and current liabilities.
C.
difference between total assets and total liabilities.
D.
difference between shareholders’ equity and long-term debt.
Question #12
C-Corporations do not have their income subject to double taxation.
A.
False
B.
True
Question #13
Which of the following business organizational forms subject(s) the owner(s) to unlimited liability?
A.
Sole proprietorship
B.
General partnership
C.
Corporation
D.
Both Sole proprietorship and General partnership
Question #14
Identify whether the following transactions are primary market or secondary market transactions. Jim Hendry bought 300 shares of IBM through his brokerage account.
A.
Secondary
B.
Primary
Question #15
Identify whether the following transactions are primary market or secondary market transactions. Peggy Jones bought $5,000 of General Motors bonds from another investor.
A.
Primary
B.
Secondary
Question #16
Identify whether the following transactions are primary market or secondary market transactions. Hathaway Insurance Company bought 500,000 shares of Trigen Corp. when the company issued stock.
A.
Secondary
B.
Primary
Question #17
If you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in:
A.
a primary market transaction.
B.
a futures market transaction.
C.
none of these
D.
a secondary market transaction.
Question #18
If a firm needs to adjust its liquidity position, then it would participate in:
A.
the bond market.
B.
the money market.
C.
the stock market.
D.
the auction market.
Question #19
The most common reason that corporate firms use the futures and options markets is:
A.
none of these
B.
to hedge risk.
C.
to make deposits.
D.
to take risk.
Question #20
Which of the following statements is CORRECT?
A.
Money market instruments are illiquid and have high default risk.
B.
If your uncle in New York sold 100 shares of Apple through his broker to an investor in New York, this would be a primary market transaction.
C.
An example of a primary market transaction would be inheriting 1000 shares of GE from your grandfather.
D.
Capital market instruments include both long-term debt and common stocks.
Question #21
Executives that repeatedly put their own interests before that of the firm may find that they have difficulty in finding another job after their current one. This is an example of:
A.
the board of directors affecting the prospects of a manager.
B.
the market for corporate control.
C.
none of these
D.
the managerial labor market disciplining managers.
Question #22
Who among the following is the "principal" in the agency relationship of a corporation?
A.
A company engineer
B.
A stockholder holding 10% or more of any class of voting stock
C.
The CEO of the firm
D.
The board of directors
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