UO BA 318 Online Midterm| Ques ons and answers |
Updated RATED A+
T/F: Sole proprietorships are the most common form of business organiza on because liability is
limited to the amount invested in the business by the sole proprietor.
F
T/F: The corporate form has the disadvantage of double taxa on rela ve to a sole
proprietorship.
T
T/F: The corporate form has the advantage of unlimited liability.
F
T/F: The corporate form is preferred over the sole proprietorship because a corpora on is easier
to form and faces less regula on.
F
Sole Proprietorship
a business owned and managed by a single individual
Corpora on
A business owned by stockholders who share in its profits but are not personally responsible for
its debts
The goal of the firm should be:
maximiza on of shareholder wealth
Agency Problem
the possibility of conflict of interest between the stockholders and management of a firm
Which of the following statements are true regarding "Agency Problem"?
1. Managers might a+empt to benefit themselves in terms of salary and perquisites at the
expense of shareholders
2. The agency problem results from the separa on of management and the ownership of the
firm.
, 3. The agency problem may interfere with the implementa on of maximizing shareholder
wealth.
All of these are true
T/F: The corpora on is a legal en ty separate from it owners; thus it is possible for the
corpora on to con nue even upon the death of one or more shareholders.
T
Capital structure decisions include all of the following EXCEPT:
1. Deciding the total amount of debt the firm should take on.
2. Deciding the mix of debt and equity for the firm.
3. Deciding what assets to purchase.
4. Deciding how to pay for long term projects.
Deciding what assets to purchase.
capital structure decision
minimizing the cost of capital by using the right mix of debt and equity
equity financing
funds provided by the owners of a company
Working Capital
short term assets and liabili es
4 Ways to Reduce Agency Problems
1. Compensa on based on firm performance
2. Board of Directors oversees managers
3. Threat of takeover
4. Bank & Credit Analysis
Sarbanes-Oxley Act
A law passed by Congress that requires the CEO and CFO to cer fy that their firm's financial
statements are accurate.
Stakeholders
Anyone other than the firm's stockholders or creditors that might have a claim on the cash flows
of a firm
Updated RATED A+
T/F: Sole proprietorships are the most common form of business organiza on because liability is
limited to the amount invested in the business by the sole proprietor.
F
T/F: The corporate form has the disadvantage of double taxa on rela ve to a sole
proprietorship.
T
T/F: The corporate form has the advantage of unlimited liability.
F
T/F: The corporate form is preferred over the sole proprietorship because a corpora on is easier
to form and faces less regula on.
F
Sole Proprietorship
a business owned and managed by a single individual
Corpora on
A business owned by stockholders who share in its profits but are not personally responsible for
its debts
The goal of the firm should be:
maximiza on of shareholder wealth
Agency Problem
the possibility of conflict of interest between the stockholders and management of a firm
Which of the following statements are true regarding "Agency Problem"?
1. Managers might a+empt to benefit themselves in terms of salary and perquisites at the
expense of shareholders
2. The agency problem results from the separa on of management and the ownership of the
firm.
, 3. The agency problem may interfere with the implementa on of maximizing shareholder
wealth.
All of these are true
T/F: The corpora on is a legal en ty separate from it owners; thus it is possible for the
corpora on to con nue even upon the death of one or more shareholders.
T
Capital structure decisions include all of the following EXCEPT:
1. Deciding the total amount of debt the firm should take on.
2. Deciding the mix of debt and equity for the firm.
3. Deciding what assets to purchase.
4. Deciding how to pay for long term projects.
Deciding what assets to purchase.
capital structure decision
minimizing the cost of capital by using the right mix of debt and equity
equity financing
funds provided by the owners of a company
Working Capital
short term assets and liabili es
4 Ways to Reduce Agency Problems
1. Compensa on based on firm performance
2. Board of Directors oversees managers
3. Threat of takeover
4. Bank & Credit Analysis
Sarbanes-Oxley Act
A law passed by Congress that requires the CEO and CFO to cer fy that their firm's financial
statements are accurate.
Stakeholders
Anyone other than the firm's stockholders or creditors that might have a claim on the cash flows
of a firm
