Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:
  • was facilitated in the secondary market.
Which one of the following is least likely to be an agency problem?
  • increasing the market value of the firm's shares
Which one of the following is an agency cost?
  • hiring outside accountants to audit the company's financial statements
Which one of the following actions by a financial manager is most apt to create an agency problem?
  • 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:
  • 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?
  • corporations delisting from major exchanges
Decisions made by financial managers should primarily focus on increasing which one of the following?
  • market value per share of outstanding stock

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

  • increase in the market value per share
Which one of the following best states the primary goal of financial management?
  • 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.

  • 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?

  • limited partnership