Chapter 1

Question 1

A business formed by two or more individuals or entities

Answer 1

partnership

Question 2

bylaws

Answer 2

rules describing how the corporation regulates its existence

Question 3

A business created as a distinct legal entity composed of one or more individuals or entities.

Answer 3

corporation

Question 4

The process of planning and managing a firm’s long-term investments.

Answer 4

capital budgeting

Question 5

corporation

Answer 5

A business created as a distinct legal entity composed of one or more individuals or entities.

Question 6

The mixture of debt and equity maintained by a firm.

Answer 6

capital structure

Question 7

taxing corporate profits twice

Answer 7

double taxation

Question 8

Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Answer 8

stakeholder

Question 9

An important mechanism by which unhappy stockholders can act to replace existing management by exercising the authority to vote someone else’s stock.

Answer 9

proxy fight

Question 10

double taxation

Answer 10

taxing corporate profits twice

Question 11

proxy fight

Answer 11

An important mechanism by which unhappy stockholders can act to replace existing management by exercising the authority to vote someone else’s stock.

Question 12

capital budgeting

Answer 12

The process of planning and managing a firm’s long-term investments.

Question 13

capital structure

Answer 13

The mixture of debt and equity maintained by a firm.

Question 14

primary market

Answer 14

the original sale of securities by governments and corporations

Question 15

all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share

Answer 15

general partnership

Question 16

working capital

Answer 16

A firm’s short-term assets and liabilities.

Question 17

A firm’s short-term assets and liabilities.

Answer 17

working capital

Question 18

stakeholder

Answer 18

Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Question 19

sole proprietorship

Answer 19

A business owned by a single individual

Question 20

partnership

Answer 20

A business formed by two or more individuals or entities

Question 21

A market who’s purpose is to match those who wish to sell with those who wish to buy

Answer 21

Auction markets

Question 22

Dealer markets in stocks and long-term debt

Answer 22

over-the-counter (OTC) markets

Question 23

partnership agreement

Answer 23

The way partnership gains (and losses) are divided

Question 24

the study of the relationship between business decisions and the value of the stock in the business.

Answer 24

corporate finance

Question 25

limited partnership

Answer 25

one or more general partners will run the business and have unlimited liability, but there will be one or more limited partners who will not actively participate in the business

Question 26

The relationship between stockholders and management

Answer 26

agency relationship

Question 27

secondary markets

Answer 27

those in which these securities are bought and sold after the original sale

Question 28

Stocks that trade on an organized exchange are said to be _____

Answer 28

listed

Question 29

The way partnership gains (and losses) are divided

Answer 29

partnership agreement

Question 30

agency problem

Answer 30

The possibility of conflict of interest between the stockholders and management of a firm

Question 31

Auction markets

Answer 31

A market who’s purpose is to match those who wish to sell with those who wish to buy

Question 32

the costs of the conflict of interest between stockholders and management.

Answer 32

agency costs

Question 33

over-the-counter (OTC) markets

Answer 33

Dealer markets in stocks and long-term debt

Question 34

corporate finance

Answer 34

the study of the relationship between business decisions and the value of the stock in the business.

Question 35

agency relationship

Answer 35

The relationship between stockholders and management

Question 36

The possibility of conflict of interest between the stockholders and management of a firm

Answer 36

agency problem

Question 37

unlimited liability

Answer 37

looking beyond business assets to the proprietor’s personal assets for payment

Question 38

agency costs

Answer 38

the costs of the conflict of interest between stockholders and management.

Question 39

A business owned by a single individual

Answer 39

sole proprietorship

Question 40

articles of incorporation

Answer 40

a number of things, including the corporation’s name, its intended life (which can be forever), its business purpose, and the number of shares that can be issued. This information must normally be supplied to the state in which the firm will be incorporated

Question 41

looking beyond business assets to the proprietor’s personal assets for payment

Answer 41

unlimited liability

Question 42

the original sale of securities by governments and corporations

Answer 42

primary market

Question 43

general partnership

Answer 43

all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share

Question 44

one or more general partners will run the business and have unlimited liability, but there will be one or more limited partners who will not actively participate in the business

Answer 44

limited partnership

Question 45

those in which these securities are bought and sold after the original sale

Answer 45

secondary markets

Question 46

a number of things, including the corporation’s name, its intended life (which can be forever), its business purpose, and the number of shares that can be issued. This information must normally be supplied to the state in which the firm will be incorporated

Answer 46

articles of incorporation

Question 47

rules describing how the corporation regulates its existence

Answer 47

bylaws