Which one of the following is a means by which shareholders can replace company management?
Correct answer(s):
- proxy fight
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Which one of the following is least likely to be an agency problem?
Correct answer(s):
- increasing the market value of the firm's shares
Which one of the following is an agency cost?
Correct answer(s):
- hiring outside accountants to audit the company's financial statements
Which form of business structure is most associated with agency problems?
Correct answer(s):
- corporation
Which one of the following actions by a financial manager is most apt to create an agency problem?
Correct answer(s):
- increasing current profits when doing so lowers the value of the firm's equity
A firm which opts to “go dark” in response to the Sarbanes-Oxley Act:
Correct answer(s):
- can provide less information to its shareholders than it did prior to "going dark".
Which one of the following is an unintended result of the Sarbanes-Oxley Act?
Correct answer(s):
- corporations delisting from major exchanges
The Sarbanes-Oxley Act of 2002 is a governmental response to:
Correct answer(s):
- management greed and abuses.
Decisions made by financial managers should primarily focus on increasing which one of the following?
Correct answer(s):
- market value per share of outstanding stock
Why should financial managers strive to maximize the current value per share of the existing stock?
Correct answer(s):
Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?
Correct answer(s):
- increase in the market value per share
Which one of the following best states the primary goal of financial management?
Correct answer(s):
- maximize the current value per share
Sally and Alicia currently are general partners in a business located in Atlanta, Georgia. They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected. Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select, they wish to be treated equally.
Correct answer(s):
- limited liability company
Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm’s debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm’s profits and wish to keep the initial organizational costs of the business to a minimum.
Which form of business entity should these individuals adopt?
Correct answer(s):
- limited partnership
Which type of business organization has all the respective rights and privileges of a legal person?
Correct answer(s):
- corporation
Which one of the following business types is best suited to raising large amounts of capital?
Correct answer(s):
- corporation
Which one of the following characteristics applies to a limited liability company?
Correct answer(s):
- taxed similar to a partnership
Corporate bylaws:
Correct answer(s):
- determine how a corporation regulates itself.
Which one of the following statements is correct?
Correct answer(s):
- Both sole proprietorship and partnership income is taxed as individual income.
Which one of the following statements is correct?
Correct answer(s):
- Corporations can raise large amounts of capital generally easier than partnerships can.