Chapter 1 Flashcards
(15 cards)
The controller, rather than the treasurer, is typically responsible for which one of the following functions?
A. Depositing cash receipts
B. Processing cost reports
C. Analyzing equipment purchases
D. Approving credit for a customer
E. Paying a vendor
B. Processing cost reports
Usually, the treasurer of a corporation reports directly to the:
A. Board of directors.
B. Chair of the board.
C. Chief executive officer.
D. President
E. Vice president of finance ( CFO)
E. Vice president of finance (CFO)
In a typical corporate organizational structure:
A. The vice president of finance reports to the chair of the board.
B. The chief executive officer reports to the president.
C. The controller reports to the chief financial officer.
D. The treasurer reports to the president.
E. The chief operations officer reports to the vice president of production.
C. The controller reports to the chief financial officer.
Which one of the following questions involves a capital budgeting decision?
A. How many shares of stock should the firm issue?
B. Should the firm purchase a new machine for the production line?
C. Should the firm borrow money to acquire new equipment?
D. How much inventory should the firm keep on hand?
E. How much money should be kept in the checking account?
B. Should the firm purchase a new machine for the production line?
Which one of the following questions involves a capital structure decision?
A. Which one of two project proposals should the firm implement?
B. How should the firm allocate its limited available funds among acceptable projects?
C. How much funding should be allocated to financing customer purchases of a new product?
D. How much debt should the firm incur to fund a project?
E. How much inventory will be needed to support a project?
D. How much debt should the firm incur to fund a project?
Determining the number of shares of stock to issue is an example of a _________ decision.
A. capital rationing
B. net working capital
C. capital budgeting
D. capital allocation
E. capital structure
E. Capital structure
Financial managers should strive to maximize the current value per share of the existing stock to:
A. Ensure the company will grow in size at the maximum possible rate.
B. Provide the greatest opportunity for employees to earn high salaries.
C. Best represents the interests of the current owners of the firm.
D. Increase the current dividends per share.
E. Create the possibility of rewarding high-performing managers with shares of stock.
C. Best represents the interests of the current owners of the firm.
A general partner:
A. is personally responsible for 100 percent of the debts of the partnership.
B. is responsible for 80 percent of the firm’s debts if he or she owns 80 percent of the partnership.
C. faces double taxation whereas a limited partner does not.
D. has a maximum loss equal to his or her equity investment.
E. receives a salary in lieu of a portion of the profits.
A. is personally responsible for 100 percent of the debts of the partnership.
Which form of business would be the best choice if it were necessary to raise large amounts of capital?
A. Sole proprietorship
B. Limited liability company
C. Corporation
D. General partnership
E. Limited partnership
C. Corporation
Which of the following actions would be considered an agency problem?
A. An owner of a sole proprietorship takes company office supplies for personal use
B. Both partners in a general partnership close the office early one day to go skiing
C. A manager in a corporation buys shares of the company’s stock when the price falls
D. A manager in a corporation makes online personal travel arrangements during work hours with company funds
E. A shareholder in a corporation sells shares of the company’s stock when the price rises
D. A manager in a corporation makes online personal travel arrangements during work hours with company funds
Which of the following actions would be most likely to decrease agency costs for the firm?
A. Increase employees’ salaries to exceed the salaries paid by competitors
B. Pay all employees based on the amount of revenue generated by the firm
C. Prohibit employees from becoming shareholders of the firm
D. Pay only salary without bonus
E. Reward high-performing employees with shares of stock rather than cash bonus
E. Reward high-performing employees with shares of stock rather than cash bonus
Eduardo sold 500 shares of Microsoft stock on Ameritrade. This transaction:
A. took place in the primary market.
B. occurred in a dealer market.
C. occurred in the secondary market.
D. involved a proxy.
E. was a private placement.
C. occurred in the secondary market.
Which one of the following is an agency cost?
A. Accepting an investment opportunity that will add value to the firm
B. Increasing the quarterly dividend
C. Investing in a new project that creates firm value
D. Hiring outside accountants to audit the company’s financial statements
E. Closing a division of the firm that is operating at a loss
D. Hiring outside accountants to audit the company’s financial statements
Agency problems are most likely to be associated with:
A. sole proprietorships.
B. general partnerships.
C. limited partnerships.
D. Corporations
E. limited liability companies.
D. Corporations
Shareholders can replace company management by implementing:
A. stock options.
B. Promotions
C. the Sarbanes-Oxley Act.
D. an agency play.
E. a proxy fight.
E. a proxy fight.
