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BA 323 HW Ch 1

Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge of:
capital structure management
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:
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:
working capital management
Margie opened a used bookstore and is both the 100 percent owner and the store’s manager. Which type of business entity does Margie own if she is personally liable for all the store’s debts?
Sole proprietorship
The potential conflict of interest between a firm’s owners and its managers is referred to as which type of conflict?
Agency
Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?
International finance
If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?
Investments
Which one of the following occupations best fits into the corporate area of finance?
Chief financial officer
Which one of the following functions is generally a responsibility assigned to the corporate treasurer?
Capital expenditures
Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?
Cash management
Which one of the following applies to a general partnership?
Any one of the partners can be held solely liable for all of the partnership’s debt.
A corporation:
is a legal entity separate from its owners.
The primary goal of financial management is to maximize:
the market value of existing stock.
The primary goal of financial management is most associated with increasing the:
market value of the firm.
An agency issue is most apt to develop when:
the control of a firm is separated from the firm’s ownership
Which one of the following is a working capital decision?
How much cash should the firm keep in reserve?
Which one of the following is a capital structure decision?
Establishing the preferred debt-equity level
Working capital management includes which one of the following?
Determining which customers will be granted credit
The daily financial operations of a firm are primarily controlled by managing the:
working capital.
Maria is the sole proprietor of an antique store that is located in a rented warehouse. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed?
I. Sell the inventory and apply the proceeds to the debt
II. Sell the lighting fixtures from the building and apply the proceeds to the debt
III. Withdraw funds from Maria’s personal account at the bank to pay the store’s debt
IV. Sell any assets Maria personally owns and apply the proceeds to the store’s debt
I, III, and IV only
Which one of the following applies to a general partnership?
Any one of the partners can be held solely liable for all of the partnership’s debt.
One advantage of the corporate form of organization is the:
ability to raise larger sums of equity capital than other organizational forms.
The primary goal of financial management is most associated with increasing the:
market value of the firm
The Sarbanes-Oxley Act of 2002 has:
essentially made officers of publicly traded firms personally responsible for the firm’s financial statements.
Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
Increase the protections against corporate fraud
The Sarbanes-Oxley Act:
require the corporate officers to personally attest that the financial statements are a fair representation of the company’s financial results.
Which one of the following situations is most apt to create an agency conflict?
Basing management bonuses on the length of employment
Which one of the following is most apt to align management’s priorities with shareholders’ interests?
Compensating managers with shares of stock that must be held for a minimum of three years
Probably the least effective means of aligning management goals with shareholder interests is:
automatically increasing management salaries on an annual basis.
One example of a primary market transaction would be the:
sale of 1,000 shares of newly issued stock by Alt Company to Miquel.
An auction market:
has a physical trading floor
Which one of the following statements is correct?
NASDAQ has more listed stocks than does the NYSE.
Which one of the following statements is correct?
The primary purpose of the NYSE is to match buyers with sellers.

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