Enterprise value is equal to the market value of a firm's equity plus the market value of a firm's debt _____. correct answers minus cash
The purpose of the firm is to create ____ for the owner correct answers value
A firm's balance sheet shows a snapshot of the firm's finances... correct ans...
FINC 5331 || All Correct.
Enterprise value is equal to the market value of a firm's equity plus the market value of a firm's
debt _____. correct answers minus cash
The purpose of the firm is to create ____ for the owner correct answers value
A firm's balance sheet shows a snapshot of the firm's finances... correct answers at a single point
in time
_____ budgeting is the process of making and managing expenditures on long-term assets.
correct answers Capital
Example of current asset correct answers Inventory, cash
In large firms, financial activity is usually associated with which top officer? correct answers
Chief financial officer
Shareholders' equity is the difference between which of the following? correct answers Total
assets and total debt
Capital budgeting is concerned with making and managing expenditures on _____ correct
answers long-term assets
On a balance sheet, patents and trademarks are classified as ______. correct answers fixed assets
Which corporate officer is responsible for managing the firm's cash? correct answers Treasurer
Which of the following positions generally report to the chief financial officer (CFO)? correct
answers Treasurer, controller
Which of the following statements are true about shareholders' equity? correct answers
Shareholders' equity is a residual claim on a firm's assets.
Shareholders' equity is the difference between the value of a firm's assets and its debt.
A sole proprietorship is a business owned by ______ person(s). correct answers one
Which of the following are examples of fixed assets? correct answers Warehouses, equipment
Which corporate officer is responsible for accurate financial accounting of the firm's activities?
correct answers Controller
A business formed by two or more people and has no separate legal authority is known as a
_____. correct answers partnership
True or false: A general partnership may be formed by oral agreement. correct answers True
,In a limited partnership, a limited partner's liability for business debts is ______. correct answers
limited to their cash contribution to the partnership
Which of the following are important when considering a partnership? correct answers Taxation
of partnership income
Personal liability for firm debts
Fund raising limitations
Which of the following show why a corporation is the most important form of business? correct
answers Corporations can sue and be sued.
A corporation is a separate legal entity with the ability to acquire and exchange property.
Corporations can enter into contracts.
A general partnership has which of the following characteristics? correct answers It is difficult to
transfer ownership
Each owner has unlimited liability for all firm debts
A corporation is a distinct ______ entity and as such can have a name and take advantage of the
legal powers of natural persons. correct answers legal
In a limited partnership, the limited partners _________. correct answers do not participate in
managing the day-to-day business
An organization must prepare ______ and bylaws when forming a corporation. correct answers
Articles of Incorporation
When a corporation is formed, it is granted which of the following rights? correct answers
provincial citizenship for jurisdictional purposes
The ability to issue stock
Legal powers to sue
Bylaws are meant to regulate: correct answers shareholders, directors, and officers
The corporation comprises shareholders, directors, and: correct answers corporation officers
What must an organization prepare to start a corporation? correct answers articles of
incorporation
set of bylaws
The rules used by a corporation to regulate its existence are known as _________. correct
answers Bylaws
Since ________ and ownership are separated, a corporation's life is unlimited. correct answers
management
,Shareholders' liability is ______ to the amount invested in ownership shares. correct answers
limited
How is ownership transferred in a corporation? correct answers Ownership is transferred by
gifting or selling shares of stock
Some of the cash flow generated by a firm goes back to the financial markets in the form of
______. correct answers dividends and debt payments.
The life of a corporation ______. correct answers is unlimited
A shareholder's liability is limited to which of these? correct answers The amount the
shareholder invested in the corporation
What determines when a sale is recorded for accounting purposes? correct answers Generally
accepted accounting principles
Assuming interest rates are positive, one dollar received today is worth ______ one dollar
received next year. correct answers more than
Some of the cash flow sent from the financial markets to the firm in the form of stock purchases
is then used to invest in: correct answers assets
Most investors have an aversion to ______. correct answers risk
Why would it not make sense for a firm to set financial goals like "maximize profits" or
"minimize costs"? correct answers A sole focus on items like this may lead to ignoring what is in
the stockholders' long-term best interests.
True or false: Accounting profit does not adequately account for cash flow. correct answers True
When would individuals prefer to receive cash flows? correct answers sooner rather than later
A bad financial decision is defined as a decision that ______ owners' equity. correct answers
decreases
Which of the following, according to the textbook, are possible financial goals for a company?
correct answers Survival
Maximize profits
Minimize costs
The relationship between stockholders and management can best be described as a(n) ______
relationship. correct answers agency
The primary responsibility of financial managers is to increase the value of _____. correct
answers existing shares of stock
, A good financial decision will do which of the following? correct answers Increase market value
of shareholders' equity
Increase the value of the firm's existing stock
The costs incurred due to a conflict of interest between stockholders and management are called
______ costs. correct answers agency
In a shareholder-manager relationship, who is the agent? correct answers managers
What is the primary purpose of awarding stock options to managers? correct answers To give
managers the incentive to pursue shareholders' goals, such as, increasing shareholder value
Which of the following can be used to encourage managers to act in the best interests of
shareholders? correct answers Stock options and bonuses
Managerial compensation tied to performance
Monitoring through reports
The threat of termination
The owners of a firm wish to make a risky investment with upside, as the value of the stock may
go up. Management wants to avoid this investment, as there is significant risk, and jobs may be
lost as a result. This is an example of an correct answers agency cost
______ are frequently used to encourage key managers to maximize the value of the firm's stock.
correct answers Stock options
What are the two questions to be asked in ascertaining how effective managers will be in
advocating for stockholders' best interests? correct answers Can managers be replaced if they do
not pursue stockholder goals?
How closely are management goals aligned with stockholder goals?
Regulation is meant to: correct answers improve corporate governance
reduce conflicts of interest
The 1934 Securities Exchange Act deals with the important issue of ______ trading. correct
answers insider
Which of the following are considered non-owner stakeholders in a company? correct answers
Government
Suppliers
Employees
Which of the following is true concerning government regulation? correct answers Regulation
can be costly to a firm.
Regulation can help ensure firms disclose relevant information to investors.
Regulation can help reduce conflicts of interest between managers and shareholders.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller FullyFocus. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.99. You're not tied to anything after your purchase.
