Fin 301 Chp 1
Treasury bill analyst
Chief financial officer
Insurance risk manager
Local bank manager
The controller reports directly to the corporate treasurer.
The treasurer reports directly to the board of directors.
The chief financial officer reports directly to the board of directors.
The credit manager reports directly to the controller.
The controller reports directly to the chief financial officer
Size of future cash flows only
Size and timing of future cash flows only
Timing and risk of future cash flows only
Risk and size of future cash flows only
Size, timing, and risk of future cash flows
Determining the optimal inventory level
Establishing the preferred debt-equity level
Selecting new equipment to purchase
Setting the terms of sale for credit sales
Determining when suppliers should be paid
Deciding which new projects to accept
Deciding whether to purchase a new machine or fix a currently owned machine
Determining which customers will be granted credit
Determining how many new shares of stock should be issued
Establishing the target debt-equity ratio
total debt level.
Limited liability company
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
The business entity has an unlimited life.
The ownership can easily be transferred to another individual.
The owner enjoys limited liability for the firm’s debts.
Debt financing is easy to arrange in the firm’s name.
Obtaining additional equity is dependent on the owner’s personal finances.
The firm’s operations must be controlled by a single partner.
Any one of the partners can be held solely liable for all of the partnership’s debt.
The profits of the firm are taxed as a separate entity.
Each partner’s liability for the firm’s debts is limited to each partner’s investment in the firm.
The profits of a general partnership are taxed the same as those of a corporation.
only the partnership debts that he or she personally created.
his or her proportionate share of all partnership debts regardless of which partner incurred that debt.
the total debts of the partnership, even if he or she was unaware of those debts.
the debts of the partnership up to the amount he or she invested in the firm.
all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.
Nontaxable share of any profits
Control over the daily operations of the firm
Losses limited to capital invested
Unlimited profits without risk of incurring a loss
Active market for ownership interest
All partners have their losses limited to their capital investment in the partnership.
All partners are treated equally.
There must be at least one general partner.
Equity financing is easy to obtain and unlimited.
Any partner can transfer his or her ownership interest without ending the partnership.
are proportionately liable for the firm’s debts.
are protected from all financial losses.
have the ability to change the corporation’s bylaws.
receive tax-free distributions since all profits are taxed at the corporate level.
have basically no control over the actual corporation.
is a hybrid between a sole proprietorship and
prefers its profits be taxed as personal income to its owners.
that meets the IRS criteria to be an LLC will be taxed like a corporation.
provides limited liability for some, but not all, of its owners.
cannot be created for professional service firms, such as accountants and attorneys.
allow a portion of their owners to enjoy limited liability while granting the other portion of their owners control over the entity.
provide the benefits of the corporate structure only to foreign-based entities.
spin off a wholly owned subsidiary.
allow companies to reorganize themselves through the bankruptcy process.
provide limited liability while avoiding double taxation.
reduced the annual compliance costs of all publicly traded firms in the U.S.
decreased senior management’s involvement in the corporate annual report.
greatly increased the number of U.S. firms that are going public for the first time.
decreased the number of U.S.
firms going public on foreign exchanges.
essentially made officers of publicly traded firms personally responsible for the firm’s financial statements.
Decrease the number of corporations that can be publicly traded
Increase the protections against corporate fraud
Limit secondary issues of corporate securities
Increase the dividends paid to shareholders
Increase the number of firms that “go dark”
Compensating a manager based on his or her division’s net income
Giving all employees a bonus if a certain level of efficiency is maintained
Hiring an independent consultant to study the operating efficiency of the firm
Basing management bonuses on the length of employment
Laying off employees during a slack period
a firm encounters a period of stagnant growth.
a firm downsizes.
the control of a firm is separated from the firm’s ownership.
the firm’s owner is also its key manager.
a firm is structured as a general partnership.
Holding corporate and shareholder meetings at high-end resort-type locations preferred by managers
Compensating managers with shares of stock that must be held for a minimum of three years
Paying a special management bonus on every fifth year of employment
Increasing the number of paid holidays that long-term employees are entitled to receive
Allowing employees to retire early with full retirement benefits
the potential for a proxy fight by an unhappy segment of shareholders.
basing all management bonuses on performance goals.
holding management salaries steady while increasing stock option grants.
the threat of a takeover of the firm.
automatically increasing management salaries on an annual basis.
sale of 100 shares of stock by Maria to her best friend.
purchase by Theo of 5,000 shares of stock from his father.
sale of 1,000 shares of newly issued stock by Alt Company to Miquel.
sale by Terry of 50,000 shares of stock to his brother.
sale of 5,000 shares of stock owned by a corporate CEO to his son.
Any corporation, other than the ABC company
Any institutional shareholder
Any private individual shareholder
Only officers and directors of ABC company
match buyers with sellers.
buy and sell from their own inventory.
operate on a physical trading floor.
operate exclusively in auction markets.
are limited to
trading non-listed stocks.
is an electronic means of exchanging securities.
has a physical trading floor.
handles primary market transactions exclusively.
is also referred to as an OTC market.
NASDAQ has more listed stocks than does the NYSE.
The NYSE is a dealer market.
NASDAQ is an auction market.
NASDAQ has the most stringent listing requirements of any U.S. exchange.
The trading floor for NASDAQ is located in Chicago.
a large number of private investors.
only foreign investors.
a life-insurance company.
several private securities dealers.
the U.S. Treasury department.
All of the major stock exchanges are U.S. based.
The NYSE was created by the National Association of Securities Dealers in the early 1930s.
The Chicago Stock Exchange is a dealer market.
OTC markets have a physical trading floor generally located in either New York City or Chicago.
The primary purpose of the NYSE is to match buyers with sellers.
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