The basic regulatory framework for public trading of securities within the United States is provided by:A) the Securities Act of 1933 and the Securities Exchange Act of 1934.B) state governments.C) the Federal Reserve Bank.D) the Sarbanes-Oxley Act of 2002.E) NASDAQ.The Securities Act of 1933 focuses onA) all new and outstanding stock transactions.B) the issuance of new securities.C) the redemption of outstanding debt.D) insider trading.E) Federal Deposit Insurance Corporation (FDIC) insurance.Which one of these parties cannotbe a stakeholder of a firm?A) Newly hired company employeeB) GovernmentC) Firm's creditorsD) Business located next door to the firmE) Firm's customersThe issuance of new equity shares is a cash flow fromA) long-term creditors to a firm.B) a firm to its shareholders.C) a firm's suppliers to the firm.D) the financial markets to a firm.E) any one of a firm's stakeholders to the firm.Which one of the following is leastapt to encourage managers to act in the best interest of shareholders?A) Shareholder election of the board of directors, who in turn select managersB) Threat of a takeover by another firmC) Linking manager compensation to share valueD) Compensating managers with fixed salariesE) Granting stock options to key managersWhich form of business structure faces the greatest agency problems?A) Sole proprietorshipB) General partnershipC) Limited partnershipD) Limited liability companyE) CorporationThe articles of incorporationA) establish the rights of the shareholders.B) are rules that apply only to limited liability companies.C) address only those issues related to a corporation's managers and directors.D) establish the compensation to be granted to senior managers.E) include only the name, purpose, and intended life of the corporation.The articles of incorporationA) can be used to remove company management.B) are amended annually by the company stockholders.C) set forth the number of shares of stock that can be issued.D) set forth the rules by which the corporation regulates its existence.E) can set forth the conditions under which the firm can avoid double taxation.The decisions made by financial managers should all be ones that increase theA) size of the firm.B) growth rate of the firm.C) market value of the existing owners' equity.D) marketability of the managers.E) financial distress of the firm.Which one of the following is leastapt to convince managers to work in the best interest of the current stockholders?A) Receiving a bonus based on company profitsB) Receiving stock optionsC) Being threatened with a proxy fightD) Receiving a bonus based on company sizeE) Receiving company shares based on increases in share valueThe primary goal of financial management is toA) maximize current dividends per share of the existing stock.B) minimize operational costs and maximize firm efficiency.C) maintain steady growth in both sales and net earnings.D) maximize the current value per share of the existing stock.E) avoid financial distress.In a limited partnership,A) each limited partner's liability is limited to his net worth.B) each limited partner's liability is limited to his annual salary.C) each limited partner's liability is limited to the amount he/she invested.D) there is no limitation on liability; only a limitation on what the partner can earn.E) limitations are placed on both the salary and personal liability of each limited partner.Which one of these statements is correct?A) Firms prefer to receive cash later rather than sooner.B) Corporate finance focuses on sales and profits.C) Value creation depends solely on profits.D) The amount of April sales must equal the amount of cash received by the firm during April.E) The cash flows of a firm are generally uncertain.A proxy fight occurs wheneverA) any board member is up for re-election.B) a firm files for bankruptcy.C) a shareholder sells shares in the open market.D) a group solicits votes to replace the current board of directors.E) a firm is declared insolvent.Which one of these terms refers to a conflict of interest between the stockholders and managers of a corporation?A) Stakeholder claimB) Corporate activismC) Legal liabilityD) Breach of indemnityE) Agency problemWhich one of the following statements is correct concerning corporations?A) The shareholders of a corporation select the top managers of that corporation.B) A corporation is a distinct legal entity.C) The stockholders are usually the managers of a corporation.D) The ability of a corporation to raise capital is quite limited.E) The income of a corporation is taxed as personal income of the stockholders.The goal of financial management focuses on the fact thatA) the company will grow in size.B) employee salaries should increase over time.C) the current stockholders are the owners of the corporation.D) the firm should expand faster than its competitors.E) the current corporate officers should be highly compensated.Dividends are a cash flow fromA) a firm to the financial markets.B) a shareholder to a firm.C) the government to a shareholder.D) the financial markets to a firm.E) a firm to the government.Agency costs refer toA) corporate income subject to double taxation.B) the total dividends paid to stockholders over the lifetime of a firm.C) the costs of any conflicts of interest between stockholders and management.D) the costs that result from default and bankruptcy of a firm.E) the total interest paid to creditors over the lifetime of the firm.A stakeholder is best described as anyA) person or entity owning shares of corporate stock.B) person or entity having voting rights based on stock ownership.C) current manager who was involved in a firm's creation.D) creditor to whom the firm currently owes money.E) person or entity, other than a stockholder or creditor, who potentially has a claim on a firm's cash.
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