FIN 3403 EXAM 1 REVIEW QUESTIONS WITH
VERIFIED SOLUTIONS
A good financial decision will do which of the following?
Increase shareholders equity
Increase the value of the firm's existing stock
A corporation is a distinct ________ entity and as such can have a name and take
advantage of the legal powers of natural persons
legal
Some of the cash flow generated by a firm goes back to the financial markets in the form of
_____________?
dividends and debt payments
Which positions generally report to the CFO?
Controller
Treasurer
What are the two basic classifications under which most potential financial goals fall?
Earning or increasing profits
Controlling risk
The officer responsible for managing the firm's cash flows is the ________.
treasurer
A general partnership has which of the following characteristics?
It is difficult to transfer ownership.
Each owner has unlimited liability for all firm debts.
Which of the following can be used to encourage managers to act in the best interests of
shareholders?
The threat of termination.
Stock options and bonuses.
Managerial compensation tied to performance.
Monitoring through reports.
Which term applies to the mixture of debt and equity maintained by a firm?
Capital structure
Which of the following, are possible financial goals for a company?
,Survival
Maximize profits
Minimize costs
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
The relationship between stockholders and management can best be described as a
_________ relationship.
Agency
Because shareholders get paid last after all other obligations are satisfied, they are often
called:
Residual owners
The owners of a corporation are called ________.
Shareholders
A corporation receives cash from financial markets by selling ________ and _________.
Bonds
Stocks
The controller is responsible for which of the following tasks?
Tax reporting
Financial accounting
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling stocks.
What is true of a sole proprietorship?
It is the simplest type of business to form.
A proprietorship has a limited life.
What are among the most important questions to be asked when a business is started?
What long-term investments should be made?
How will everyday financial activities be handled?
Where will long-term financing be obtained to pay for investments?
The life of a corporation __________.
is unlimited.
Net working capital is defined as current assets minus current ________.
, liabilities
When one owner or creditor sells to another, the transaction takes place in the _________
market.
secondary
A business without separate legal authority formed by two or more people is known as a
__________.
partnership
A sole proprietorship is a business owned by ________ person(s).
one
___________ budgeting is the process of making and managing expenditures on long-term
assets.
Capital
Which of the following are included in a firm's capital structure?
Equity
Long-term debt
Which corporate officer is responsible for accurate financial reporting of the firm's
activities?
Controller
Which of the following are important when considering a partnership?
Fund raising limitations
Personal liability for firm debts
Taxation of partnership income
If you hire a real estate company to sell your house, you are most apt to encounter which
one of the following?
Agency problem
A ___________ is someone other than an owner or a creditor who potentially has a claim of
the cash flows of a firm.
stakeholder
Which one of these provides a manager an incentive to perform well?
Job prospects
The Sarbanes-Oxely Act requires corporate officers to do which of the following?
VERIFIED SOLUTIONS
A good financial decision will do which of the following?
Increase shareholders equity
Increase the value of the firm's existing stock
A corporation is a distinct ________ entity and as such can have a name and take
advantage of the legal powers of natural persons
legal
Some of the cash flow generated by a firm goes back to the financial markets in the form of
_____________?
dividends and debt payments
Which positions generally report to the CFO?
Controller
Treasurer
What are the two basic classifications under which most potential financial goals fall?
Earning or increasing profits
Controlling risk
The officer responsible for managing the firm's cash flows is the ________.
treasurer
A general partnership has which of the following characteristics?
It is difficult to transfer ownership.
Each owner has unlimited liability for all firm debts.
Which of the following can be used to encourage managers to act in the best interests of
shareholders?
The threat of termination.
Stock options and bonuses.
Managerial compensation tied to performance.
Monitoring through reports.
Which term applies to the mixture of debt and equity maintained by a firm?
Capital structure
Which of the following, are possible financial goals for a company?
,Survival
Maximize profits
Minimize costs
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
The relationship between stockholders and management can best be described as a
_________ relationship.
Agency
Because shareholders get paid last after all other obligations are satisfied, they are often
called:
Residual owners
The owners of a corporation are called ________.
Shareholders
A corporation receives cash from financial markets by selling ________ and _________.
Bonds
Stocks
The controller is responsible for which of the following tasks?
Tax reporting
Financial accounting
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling stocks.
What is true of a sole proprietorship?
It is the simplest type of business to form.
A proprietorship has a limited life.
What are among the most important questions to be asked when a business is started?
What long-term investments should be made?
How will everyday financial activities be handled?
Where will long-term financing be obtained to pay for investments?
The life of a corporation __________.
is unlimited.
Net working capital is defined as current assets minus current ________.
, liabilities
When one owner or creditor sells to another, the transaction takes place in the _________
market.
secondary
A business without separate legal authority formed by two or more people is known as a
__________.
partnership
A sole proprietorship is a business owned by ________ person(s).
one
___________ budgeting is the process of making and managing expenditures on long-term
assets.
Capital
Which of the following are included in a firm's capital structure?
Equity
Long-term debt
Which corporate officer is responsible for accurate financial reporting of the firm's
activities?
Controller
Which of the following are important when considering a partnership?
Fund raising limitations
Personal liability for firm debts
Taxation of partnership income
If you hire a real estate company to sell your house, you are most apt to encounter which
one of the following?
Agency problem
A ___________ is someone other than an owner or a creditor who potentially has a claim of
the cash flows of a firm.
stakeholder
Which one of these provides a manager an incentive to perform well?
Job prospects
The Sarbanes-Oxely Act requires corporate officers to do which of the following?
