corporate finance Exam 3

corporate finance Exam 3 share of ______ are units of ownership interest, or equity, in a corporation - Answer- common stock the _______ is the financial market in which securities are initially issued - Answer- primary market what is the principal - agent problem? - Answer- when an agent does not maximize the utility of the principal which of the following features of a corporation is LEAST accurate? - Answer- earnings from a corporation are taxed only once a limited liability company is essentially - Answer- a limited partnership without a general partner how do the shareholders of most corporations exercise their control of that corporation? - Answer- by electing members of a board of directors in most corporations, to whom does the chief financial officer report? - Answer- the board of directors which of the following is a major duty of the financial manager - Answer- -to make investment decisions -to make financing decisions -to manage cash flow from operating activities cash is a - Answer- current asset accounts payable is a - Answer- current liability a 30-yr old mortgage loan is a - Answer- long-term liability T or F: agency costs are fees paid by the management of a corporation to compensate any investor that feels it has suffered a loss due to agency problems - Answer- F T or F: partnerships are the most common type of business in the world - Answer- F t or F: the balance sheet shows the assets, liabilities, and stockholders equity of a firm over a given length of time - Answer- F the corporate controller is generally responsible for which one of these functions? - Answer- tax reporting a firms capital structure refers to the firms - Answer- proportions of financing from current and long term debt and equity for a firm to create value it must - Answer- create more cash flow than it uses the ultimate control of a corportation lies in the hands of the corporate: - Answer- stock holders a proxy fight occurs when: - Answer- a group solicits voting rights to replace the board of directions the basic regulatory framework for the public trading of securities in the US was provided by the: - Answer- securities act of 1933 and the securities exchange act of 1934 US corporate taxes switch to a constant flat rate once the average tax reaches - Answer- 35 percent operating cash flow is defined as - Answer- EBIT+ Depreciation - Taxes earnings per share will increase when - Answer- depreciation decreases assuming the numbers of shares outstanding remains constant, an increase in dividends per share will reduce the - Answer- addition to retained earnings book value - Answer- is based on historical cost if you sell an asset, you are most apt to receive which value for that asset - Answer- market value all else held constant, the earnings per share will - Answer- decrease as the number of shares outstanding increase according to the generally accepted accounting principles, costs are - Answer- matched with revenues when you are making a financial decision, the most relevant tax rate is the ___ rate - Answer- marginal assets are listed on the balance sheet in order of - Answer- decreasing liquidity according to generally accepted accounting principles (GAAP), revenue is recognized as income when: - Answer- the transaction is complete and the goods or services are delivered the cash flow of the firm must be equal to: - Answer- cash flow to stockholders plus cash flow to creditors