Which one of the following actions by a financial manager is most exact to create an agency problem?

1. The division of profits and losses among themembers of a partnership is formalized in the:

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   • Which one of the following can best be characterized as an agency problem?
   • What is the 4 major financial manager's responsibilities?
   • What is the most important type of decision that the financial manager makes quizlet?
   • What is agency problem and how can it be resolved?

   *D. partnership agreement.

2. Agency costs refer to:

   *B. the costs of any conflicts of interestbetween stockholders and management

3. Working capital management includes decisions concerning which of the following

   • I. accounts payable
   • II. accounts receivable
   • IV. inventory

4. Working capital management

   *E. is concerned with managing day to day cash flow.

5. Which one of the following best describes theprimary advantage of being a limited partner rather than a general partner?

   *B. Liability for firm debts limited to the capital invested

6. A general partner:

   *D. has more management responsibility than a limited partner.

7. A partnership:

   *E. terminates at the death of any general partner.

8. Which of the following are disadvantages of a partnership

   • . limited life of the firm
   • II. personal liability for firm debt
   • IV. lack of ability to transfer partnership interest

9. . Which of the following are advantages of the corporate form of business ownership?

   • I. limited liability for firm debt
   • III. ability to raise capital
   • IV. unlimited firm life

10. . Which one of the following statements is correct

    *C. Both sole proprietorships and partnerships are taxed in a similar fashion.

11. The owners of a limited liability company prefer:

    *C. being taxed personally on all business income.

12. Which type of business organization has all therespective rights and privileges of a legal person?

    *B. Corporation

13. Which one of the following actions by a financial manager creates an agency problem?

    *B. Agreeing to expand the company at the expense of stockholders' value

14. 14. Which of the following help convince managers to work in the best interest of the stockholders?

    • I. compensation based on the value of the stock
    • II. stock option plans
    • III. threat of a proxy fight

15. A proxy fight occurs when

    B. a group solicits proxies to replace the board of directors

16. Which of the following are key requirements of the Sarbanes-Oxley Act?

    • I. Officers of the corporation must review and sign annual reports.
    • III. Annual reports must list deficiencies in internal controls.

17. Insider trading is:

    *C. illegal.

18. 18. The Securities Exchange Act of 1934 focuses on:

    *A. insider trading.

19. 19. The basic regulatory framework in the United States was provided by:

    • A. the Securities Act of 1933.
    • C. the Securities Exchange Act of 1934.

20. 20. Accounting profits and cash flows are

    *A. generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows.

21. The decision concerning the type and amount of debt to be issued is a _____ decision.

    c. capital structure

22. Which one of the following entities has an unlimited life?

    a. corporation

23. Which of the following business owners are most at risk for losing their personal assets due to business debts?

    c. sole proprietors and general partners

24. An agency problem is most apt to exist in which one of the following situations?

    d. managers prefer increasing bonuses over increasing dividends

25. Capital budgeting refers to the:

    c. mix of plant and equipment used for operational purposes.

26. Tim has been promoted and is now in charge of all fixed asset purchases. In other words, Tim is in charge of:

    capital budgeting.

27. Lester's BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred to as the firm's:

    C. working capital.

28. 3. Margie opened a used book store 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?

    A. Sole proprietorship

29. Todd and Cathy created a firm that is a separate legal entity and will share ownership of that firm on a 50/50 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

    B. Corporation

30. 5. The federal government has a tax claim on the cash flows of The Window Store. This claim is defined as a claim by one of the firm's:

    E. stakeholders.

31. 6. Which one of the following is a working capital decision?

    E. How much cash should the firm keep in reserve?

32. 7. Which one of the following applies to a general partnership?

    B. Any one of the partners can be held solely liable for all of the partnership's debt.

33. 8. Which one of the following best matches the primary goal of financial management?

    E. Increasing the market value of firm

34. 9. Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

    B. Increase protection against corporate fraud

35. 10. Which one of the following situations is most apt to create an agency conflict?

    D. Rejecting a profitable project to protect employee jobs

36. 11. Which one of the following is most apt to align management's priorities with shareholders' interests?

    B. Compensating managers with shares of stock that must be held for 3 years before the shares can be sold

37. 12. Which one of the following transactions occurred in the primary market?

    C. South Wind Products sold 1,000 shares of newly issued stock to Mike.

38. 13. Ted currently owns 100 shares of a publicly traded stock which he would like to sell. Which one of the following provides the most efficient means for Ted to sell his shares?

    E. Secondary market transaction

39. 14. Which one of the following statements related to securities dealers is correct?

    B. Dealers buy and sell from their own inventory.

40. 15. An auction market:

    B. has a physical trading floor.

41. 16. Net working capital is defined as:

    E. current assets minus current liabilities.

42. 17. The accounting statement which measures the revenues, expenses, and net income of a firm over a period of time is called the:

    B. income statement.

43. 18. The financial statement that summarizes a firm's accounting value as of a particular date is called the:

    D. balance sheet

44. 19. Cash flow from assets is defined as:

    C. operating cash flow minus the change in net working capital minus net capital spending.

45. 20. Cash flow to creditors is defined as:

    A. interest paid minus net new borrowing.

46. 21. Cash flow to stockholders is defined as:

    D. dividends paid minus net new equity raised.

47. 22. Delivery trucks are classified as:

    D. tangible fixed assets.

48. 23. Which one of the following is included in net working capital?

    E. Invoice from a supplier for inventory purchased

49. 24. All else equal, an increase in which one of the following will decrease owners' equity?

    B. Increase in accounts payable

50. 25. Highly liquid assets:

    D. can be sold quickly at close to full value.

51. 26. Financial leverage:

    E. increases the potential return to the shareholders.

52. 27. The market value of a firm's fixed assets:

    E. is equal to the estimated current cash value of those assets.

53. 28. Firms that compile financial statements according to GAAP:

    D. can still manipulate their earnings to some degree.

54. 29. The concept of marginal taxation is best exemplified by which one of the following?

    C. Mitchell's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.

55. 30. Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant?

    C. An increase in depreciation

56. 31. Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

    E. Positive cash flow to stockholders

57. 32. Which one of the following will increase cash flow from assets but not affect the operating cash flow?

    C. Sale of a fixed asset

58. 33. Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

    E. Positive cash flow from assets

Which one of the following can best be characterized as an agency problem?

What is the 4 major financial manager's responsibilities?

What is the most important type of decision that the financial manager makes quizlet?

What is agency problem and how can it be resolved?