Finance Chapter 1

Which action would be considered an agency problem?

A manager in a corporation makes online personal travel arrangements during work hours.

Which question involves a capital budgeting decision?

Should the firm purchase a new machine for the production line?

Which statement concerning stock exchanges is correct?

Some large companies are listed on Nasdaq.

The Sarbanes-Oxley Act of 2002 holds a public company’s ______ responsible for the accuracy of financial statements.

Managers

Deciding which long-term investment a firm should make is a ______ decision.

Capital budgeting

A firm’s mixture of debt and equity financing is the result of its ______ decisions.

Capital structure.

The controller, rather than the treasurer, is typically responsible for which function?

Processing cost reports

The ability of sole proprietorships and partnerships to grow larger is often hindered by their:

Inability to raise cash.

A firm owned by a single person with unlimited liability for debts is called a:

Sole proprietorship.

Three entrepreneurs X, Y, and Z want shared profits, low startup costs, and X wants limited liability/no daily role. What entity should they adopt?

Limited partnership.