Fin120

Question 1

Which type of firm generates the most revenue in the United States?

Answer 1

Corporations

Question 2

The owners of which type of firms are unlimitedly liable for the firms debt?

Answer 2

Partnerships and Sole-Proprietorships

Question 3

Which type of firms is subject to double taxation

Answer 3

Corporations

Question 4

What is the goal of a financial manager working in a corporation?

Answer 4

Maximize the shareholders equity

Question 5

What are the main tasks of a financial manager

Answer 5

1. Make investing decisions (capital budgeting)
2. Make financial decisions
3. Manage short term cash needs (working capital management

Question 6

Public corporations

Answer 6

-Shares trade on stock market
-Can have many shareholders
-Required to file its financial statements with SEC

Question 7

Private corporations

Answer 7

-No organized market for shares of a private corporation
-limited number of owners

Question 8

What are the four required financial statements?

Answer 8

-Balance sheet
-Income statement
-The statement of Cashflows
-Statement of stockholders equity

Question 9

Market Value

Answer 9

-What investors believe the firm’s aissetscan produce in the future

Question 10

Book Value

Answer 10

the difference between assets and liabilities based on historical costs

Question 11

Valuation Principle

Answer 11

the value of an asset is based on the expected future cash flows

Question 12

agency problem

Answer 12

possibility of conflict of interest between stockholders and management firm