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 a capital gain on their investment.
B.
Expects to receive interest.
C.
Expects to receive dividends.
D.
Expects to have rights as defined in the corporation's charter and bylaws.
Question #2
Which of the following business organizational forms is/are the easiest one(s) to raise capital?
A.
Corporation
B.
Sole proprietorship
C.
Both Sole proprietorship and Partnership
D.
Partnership
Question #3
Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations?
A.
Partnership
B.
Private corporation
C.
Public corporation
D.
Sole proprietorship
Question #4
Which of the following is considered a hybrid organizational form?
A.
Corporation
B.
Sole proprietorship
C.
Partnership
D.
Limited liability partnership
Question #5
From the owner’s perspective, which of the following should be the goal of a firm?
A.
Profit maximization
B.
Revenue maximization
C.
Stockholders' wealth maximization
D.
Tax minimization
Question #6
One reason for the existence of agency problems between managers and stockholders is that:
A.
managers know how to manage the firm better than stockholders.
B.
management is separate from ownership.
C.
stockholders have unreasonable expectations about managerial performance.
D.
None of these
Question #7
_____ has (have) a legal responsibility to represent stockholders’ interests.
A.
A CEO
B.
A corporation’s board of directors
C.
All of these
D.
A chairman
Question #8
One of the best ways to reduce agency conflict is by
A.
having managers report to the board of directors.
B.
hiring outside monitors to keep track of the managers’ decisions.
C.
designing an effective compensation package.
D.
instituting severe penalties for bad decisions.
Question #9
Which of the following is an example of frivolous agency costs?
A.
Investment in Land & Buildings.
B.
Providing lunch for the employees.
C.
Hiring external auditors to certify accounting statements despite having internal auditors.
D.
Excessive perks.
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 current assets and current liabilities.
B.
difference between total assets and current assets.
C.
difference between shareholders’ equity and long-term debt.
D.
difference between total assets and total liabilities.
Question #12
C-Corporations do not have their income subject to double taxation.
A.
True
B.
False
Question #13
Which of the following business organizational forms subject(s) the owner(s) to unlimited liability?
A.
Both Sole proprietorship and General partnership
B.
Corporation
C.
General partnership
D.
Sole proprietorship
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.
Secondary
B.
Primary
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.
none of these
B.
a secondary market transaction.
C.
a primary market transaction.
D.
a futures market transaction.
Question #18
If a firm needs to adjust its liquidity position, then it would participate in:
A.
the bond market.
B.
the stock market.
C.
the auction market.
D.
the money market.
Question #19
The most common reason that corporate firms use the futures and options markets is:
A.
to hedge risk.
B.
none of these
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.
Capital market instruments include both long-term debt and common stocks.
D.
An example of a primary market transaction would be inheriting 1000 shares of GE from your grandfather.
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 managerial labor market disciplining managers.
B.
the board of directors affecting the prospects of a manager.
C.
none of these
D.
the market for corporate control.
Question #22
Who among the following is the "principal" in the agency relationship of a corporation?
A.
A stockholder holding 10% or more of any class of voting stock
B.
A company engineer
C.
The board of directors
D.
The CEO of the firm
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