FIN 301 Chapter 1 Homework Exam
Question and Answers
Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of
debt and equity is referred to as the firm's: - Answer-capital structure.
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions
related to these accounts as referred to as: - Answer-working capital management
The potential conflict of interest between a firm's owners and its managers is referred to
as which type of conflict? - Answer-Agency
Working capital management includes which one of the following? - Answer-
Determining which customers will be granted credit
Which one of the following statements correctly applies to a sole proprietorship? -
Answer-Obtaining additional equity is dependent on the owner's personal finances.
A corporation: - Answer-a legal entity separated from its owners
One advantage of the corporate form of organization is the: - Answer-ability to raise
larger sums of equity capital than other organizational forms.
The primary goal of financial management is to maximize: - Answer-market value of
existing stock
The goal of financial management is to increase the: - Answer-current market value per
share.
An agency issue is most apt to develop when: - Answer-the control of a firm is
separated from the firm's ownership.
One example of a primary market transaction would be the: - Answer-sale of 1,000
shares of newly issued stock by Alt Company to Miquel.
You contacted your stock broker this morning and placed an order to sell 300 shares of
a stock that trades on the NYSE. This sale will occur in the: - Answer-secondary market
Security dealers: - Answer-buy and sell from their own inventory
The shareholders of Weil's Markets would benefit if the firm were to be acquired by
Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an
example of: - Answer-agency conflict
Question and Answers
Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of
debt and equity is referred to as the firm's: - Answer-capital structure.
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions
related to these accounts as referred to as: - Answer-working capital management
The potential conflict of interest between a firm's owners and its managers is referred to
as which type of conflict? - Answer-Agency
Working capital management includes which one of the following? - Answer-
Determining which customers will be granted credit
Which one of the following statements correctly applies to a sole proprietorship? -
Answer-Obtaining additional equity is dependent on the owner's personal finances.
A corporation: - Answer-a legal entity separated from its owners
One advantage of the corporate form of organization is the: - Answer-ability to raise
larger sums of equity capital than other organizational forms.
The primary goal of financial management is to maximize: - Answer-market value of
existing stock
The goal of financial management is to increase the: - Answer-current market value per
share.
An agency issue is most apt to develop when: - Answer-the control of a firm is
separated from the firm's ownership.
One example of a primary market transaction would be the: - Answer-sale of 1,000
shares of newly issued stock by Alt Company to Miquel.
You contacted your stock broker this morning and placed an order to sell 300 shares of
a stock that trades on the NYSE. This sale will occur in the: - Answer-secondary market
Security dealers: - Answer-buy and sell from their own inventory
The shareholders of Weil's Markets would benefit if the firm were to be acquired by
Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an
example of: - Answer-agency conflict
