FIN6406 Chapter 1 Practice HW PDF

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practice HW for FIN 6406 finance class...

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Which one of these best fits the description of an agency cost? Multiple Choice  The costs of increasing the dividend payment per share  The benefits received from reducing production costs per unit  The payment of corporate income taxes  The payment required for an outside audit of the firm  The payment of interest on a firm's debts Which one of these accounts is included in net working capital? Multiple Choice  Copyright  Manufacturing equipment  Common stock  Long-term debt

 Inventory Financial managers primarily create firm value by: Multiple Choice  maximizing current dividends.  investing in assets that generate cash in excess of their cost.  lowering the earnings per share.  increasing the firm's market share.  maximizing current sales. The process of planning and managing a firm's long-term assets is called: Multiple Choice  working capital management.  cash management.  cost accounting management.

 capital budgeting.  capital structure management. A business owned by a single individual is called a: sole proprietorship

A business formed by two or more individuals who each have unlimited personal liability for all of the firm's debts is called a: Multiple Choice  corporation.  sole proprietorship.  general partnership.  limited partnership.  limited liability company. A business created as a distinct legal entity is called a: Multiple Choice  corporation. 

sole proprietorship.  general partnership.  limited partnership.  unlimited liability company. The primary goal of financial management is to: Multiple Choice  maximize current dividends per share of the existing stock.  maximize the current value per share of the existing stock.  avoid financial distress.  minimize operational costs and maximize firm efficiency.  maintain steady growth in both sales and net earnings. One intent of the Sarbanes Oxley Act of 2002 is to: Multiple Choice 

prevent minority investors from making demands on corporations.  protect corporate directors from frivolous lawsuits.  guarantee the repayment of all future personal loans to corporate officers and directors.  protect investors from corporate abuses.  require all public corporations to "go dark" within the next twenty years. Which one of the following statements concerning a sole proprietorship is correct? Multiple Choice  A sole proprietorship is difficult to form.  The business profits are taxed twice at the federal level.  The business profits are taxed separately from the personal income of the owner. 

The owner may be forced to sell his/her personal assets to pay company debts.  A sole proprietorship has an unlimited life. Which one of the following statements concerning a sole proprietorship is correct? Multiple Choice  A sole proprietorship is difficult to form.  The business profits are taxed twice at the federal level.  The business profits are taxed separately from the personal income of the owner.  The owner may be forced to sell his/her personal assets to pay company debts.  A sole proprietorship has an unlimited life. A partnership: Multiple Choice  is taxed the same as a corporation.  terminates at the death of any limited partner.

 creates an unlimited liability for all general partners for the partnership's debts.  has the same ability as a corporation to raise capital.  allows for easy transfer of interest from one general partner to another. One advantage of a partnership is the: Multiple Choice  personal liability for all of the firm's debts.  limited life of the entity.  limited liability protection for all of the partners.  relatively low formation cost.  ease of transferring full ownership. One disadvantage of the corporate form of business ownership is the: Multiple Choice

 limited liability protection provided for all owners.  firm's ability to raise cash.  unlimited life of the firm.  difficulties encountered when changing ownership.  double taxation of profits. Which one of the following business types is best suited to raising large amounts of capital? Multiple Choice  Sole proprietorship  Limited liability company  Corporation  General partnership

 Limited partnership Accounting profits and cash flows are generally: Multiple Choice  the same since they reflect current laws and accounting standards.  the same since accounting profits reflect the timing of cash flows.  different because of GAAP rules regarding the recognition of income.  different because cash inflows must occur before revenue recognition.  the same due to the requirements of GAAP. The decisions made by financial managers should all be ones which increase the: Multiple Choice  size of the firm.  growth rate of the firm.

 marketability of the managers.  market value of the existing owners' equity.  firm's current sales. Which one of the following actions by a financial manager creates an agency problem? Multiple Choice  Borrowing money when doing so creates value for the firm  Lowering selling prices that will result in increased firm value  Agreeing to expand the company at the expense of stockholders' value  Agreeing to pay management bonuses based on the market value of the firm's stock  Refusing to spend current cash on an unprofitable project The basic regulatory framework for the public trading of securities in the United States was provided by the: Multiple Choice

 New York Stock Exchange when it was founded.  Securities Exchange Act of 1934.  Federal Reserve Bank.  Securities Act of 1933 and the Securities Exchange Act of 1934.  Sarbanes-Oxley Act in 2002....