Exam 1 Flashcards
(44 cards)
One of the most important disadvantages of the corporate form of business is:
Double taxation
An important advantage a general partner usually has is:
Usually a larger share of profit distribution when the firm is successful
True or False: There is no limit to the number of limited partners that may participate.
True
Profit maximization as a goal of the firm does not consider:
Cash flow or risk
____ _____ as a goal of the firm takes a long-run perspective and focuses on the owners of the firm.
Wealth maximization
A Subchapter S corporation has:
Limited liability for its owners
A manager has responsibilities to stockholders for:
Legal and ethical issues
In a very large corporation, the financial planner usually reports directly to the:
Treasurer
Which of the following would least affect the value of a firm’s stock?
Cashflows
Market Share
Timing on Cashflows
Risk Associated with Receiving Cash Flows
Market Share
Stocks that are offered for sale in a secondary market that consists of a network of dealers trading over computers are:
Traded on the “over-the-counter market”
Bonds that have been rated below investment grade are known as:
Junk bonds
Inflation, default, and liquidity risk premiums are most likely to be included in a corporation’s:
Commercial Paper Yield
Which of the following are traded in money markets?
1) Banker’s Acceptances
2) Treasury Banks
3) Corporate Bonds
4) Junk Bonds
Banker’s Acceptances
A bond that makes no periodic interest payments is known as a:
zero-coupon bond
With respect to spreads, a dealer has a spread that represents:
Their fee
When T-bills are issued in minimum denominations of $100 a ______ ______ ______ is occurring.
Treasury bill auction
The expected inflation rate is 4% and the nominal risk-free rate is 6%; the REAL RATE of interest is:
2%
6% - 4% = 2%
If the REAL RATE of interest is 3%, what is the inflation rate and the nominal risk-free rate?
The inflation rate = 3%
Nominal risk-free rate = 6%
6% - 3% = 3%
A junk bond’s interest rate increases relative to that of AAA corporate bonds if the economy is:
Suffering from a recession
If an executive spends money for a charitable fund or sustainability act, it is also presumed a good act for the stakeholders, is known as:
The Business Judgement Rule
Who is guaranteed dividends, or has a fixed claim, in a company?
Secured Creditors, Unsecured Creditors, and Preferred Stock Holders
Why do Common Stock Holders invest if they are not guaranteed to make any money?
They have the potential to make more money than those with fixed claims.
Where deficit economic units sell new securities to raise needed funds is the:
primary market
Where investors trade previously-issued securities with each other is the:
secondary market
