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 interest.
B.
Expects to receive a capital gain on their investment.
C.
Expects to have rights as defined in the corporation's charter and bylaws.
D.
Expects to receive dividends.
Question #2
Which of the following business organizational forms is/are the easiest one(s) to raise capital?
A.
Partnership
B.
Corporation
C.
Sole proprietorship
D.
Both Sole proprietorship and Partnership
Question #3
Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations?
A.
Public corporation
B.
Partnership
C.
Private corporation
D.
Sole proprietorship
Question #4
Which of the following is considered a hybrid organizational form?
A.
Partnership
B.
Limited liability partnership
C.
Corporation
D.
Sole proprietorship
Question #5
From the owner’s perspective, which of the following should be the goal of a firm?
A.
Revenue maximization
B.
Stockholders' wealth maximization
C.
Profit maximization
D.
Tax minimization
Question #6
One reason for the existence of agency problems between managers and stockholders is that:
A.
stockholders have unreasonable expectations about managerial performance.
B.
managers know how to manage the firm better than stockholders.
C.
management is separate from ownership.
D.
None of these
Question #7
_____ has (have) a legal responsibility to represent stockholders’ interests.
A.
A corporation’s board of directors
B.
A chairman
C.
All of these
D.
A CEO
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.
Investment in Land & Buildings.
B.
Excessive perks.
C.
Providing lunch for the employees.
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.
easiness to start.
B.
tax exemption of dividends.
C.
flow-through taxation.
D.
limited liability of owners.
Question #11
Net working capital is the:
A.
difference between total assets and current assets.
B.
difference between shareholders’ equity and long-term debt.
C.
difference between total assets and total liabilities.
D.
difference between current assets and current liabilities.
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.
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.
Primary
B.
Secondary
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 secondary market transaction.
C.
none of these
D.
a futures market transaction.
Question #18
If a firm needs to adjust its liquidity position, then it would participate in:
A.
the stock market.
B.
the bond 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 make deposits.
B.
to take risk.
C.
to hedge risk.
D.
none of these
Question #20
Which of the following statements is CORRECT?
A.
Capital market instruments include both long-term debt and common stocks.
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.
Money market instruments are illiquid and have high default risk.
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.
none of these
B.
the board of directors affecting the prospects of a manager.
C.
the managerial labor market disciplining managers.
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.
The board of directors
C.
The CEO of the firm
D.
A company engineer
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