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CH 1: Goals and Activities of Financial Management

Inflation is assumed to be a temporary problem that does not affect financial decisions
False
There is unlimited liability in a general partnership
True
Dividends paid to corporate stockholders have already been taxed once as corporate income
True
Corporate governance issues have become less important to the financial community during the first decade of the new millenium
False
A major focus of the Sarbanes-Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities, and income in their financial statements
True
Timing is not a particularly important consideration in financial decisions.
False
Money markets refer to those markets dealing with short-term securities having a life of one year or less.
True
The primary market includes the sale of securities by way of initial public offerings.
True
New issues are sold in the secondary market.
True
Higher return always induces stockholders to invest in a company.
False
What is the primary goal of financial management?
Maximizing shareholder wealth
One of the major advantages of a sole proprietorship is
Low operating costs
The partnership form of an organization
avoids double taxations of earnings and dividends found in the corporate form of an organization
Corporate governance is the
relationship and exercise of oversight by the board of directors of the company
Agency theory deals with the issue of
the conflicts that arise between the viewpoints and motivations of the firms owners and managers
The Sarbanes-Oxley Act was passed in an effort to
control corrupt corporate behavior
The major difficulty in most insider-trading cases has been
that inside trades have not been legally well defined
When a corporation uses the financial markets to raise new funds, the sale of securities is made in the
primary market
Companies that have higher risk than a competitor in the same industry will generally have
all of the options
The increase in the internationalization of financial markets has led to
all of the options

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