Unit 1 Questions Flashcards
(33 cards)
One of the most important disadvantages of the corporate form of business is
Double taxation
An agent has ___ to the principlas
A fiduciary responsibility
Which of the following claimant is paid last
Common stockholders
An example of a principal of a firm is
the owner
The sole proprietor
has unlimited liability relating to the business
Stakeholders include which of the following
employees, suppliers, creditors and owners
Hillary Rotteneggs wishes to form a company that will specialize in toxic waste removal and storage. Which type of business form would be most advantageous?
A corporation due to its limited liability
Who is entitled to the “residual income” of the firm
the owners
An example of a capital market security would be
A long-term bond
Money market securites include
commercial paper, treasury bills and negotiable certificates of deposit
The process of managing a firms long-term investments is called
capital budgeting
A sole proprietorship is defined as a business
owned by a single individual
A business organization owned by two or more individuals or entities, each of whom has unlimited liability for the firms debts, is called a
general parnternship
A firm created as a separate and distinct legal entity that may be owned by one or more individuals or entities is called a
corporation
If you accept a job as a portfolio manager, you are working in which one of the following financial areas?
investments
The capital structure of a firm refers to the firms
long term debt and equity
the daily financial operations of a firm are primarily controlled by managing the
working capital
Which of the following statements about a limited partnership is correct
each limited partnership must have at least one general partner
The advantage of being a limited partner in a limited partnership is the ability to
limit your losses to the amount invested in the firm
An agency problem is prone to exist in public corporations because
management is frequently separated from ownership
Which one of the following transactions occurred in the primary market
Valerie purchased newly issued shares of Velcro, Inc.
Theresa sold 300 shares of MNO stock on the NYSE today, this transaction occurred in
the secondary market
The major topics in corporate finance are
capital budgeting, capital structure and working capital management
From a finance viewpoint, the firm is
a bundle of risky cash flows
