Business Organization, Finance, and Ethics: Key Concepts for Students

Which forms of business organization generated the majority of business revenues and profits in the US?

Corporation

Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations?

public corporation

Which of the following is primarily responsible for managing all financial aspects of a firm?

CFO

From the owner's perspective, which of the following should be the goal of a firm?

Stockholders wealth maximization

Which of the following factors or activities can be controlled by a firm's managers?

capital budgeting decision

Who among the following is the "principle" in the agency relationship of a corporation?

The stockholders

An example of agency cost is:

a manager expensing a lavish dinner on the company expense report.

Which of the following mechanisms can help align the behavior of managers with the goals of stockholders?

well-designed management compensation

A society's idea about what actions are right and wrong are termed as:

ethics

Corruption in Business:

Creates inefficiencies in an economy.

The main objective of a firm's management should be to:

maximizes its stocks value

Advantage of the corporate form of organization

greater access to capital markets

Which of the following forms of business organization is subject to double taxation?

A C-Corporation

CEOs are hoping to get the maximum value from AI with minimum risks. Which value of the CEO's most likely trying to maximize?

Value of the company's use of AI to stockholders

Which of the following is a goal of the Paris Climate Accord?

Limit global warming to 2 degrees Celsius above pre-industrial levels

If a company invests in new technology that reduces greenhouse gas emissions, what is the likely impact on its ESG ratings?

The company's environmental score would improve, possibly leading to a better overall ESG rating

If you have provided capital to a firm, then you are

a stakeholder

A good capital budgeting decision is one in which the perceived benefits of the project are:

More than the cost of the asset

Which types of owners is protected by limited liability?

owner of a corporation

Which organizational form is best suited for a firm to sell its securities to the market?

Public corporation

In a public corporation, which of the following reports directly to the owners of a firm?

Board of Directors

Who is typically responsible for managing a large corporations financial function?

CFO

From the owner's perspective, which of the following should be the primary focus of managers?

maximizing stock value

One reason for the existence of agency problems between managers and stockholders is that:

Management is separate from ownership

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would NOT be an example of these costs?

Agency Conflicts

The main responsibility of a financial manager is to

make decisions that are in the best interest of the firm owners

Which one of the following characteristics does not pertain to corporations?

Are the easiest types of business to form

Information asymmetry is a situation in which one party in a business transaction has information that is _____ to the other parties in the transaction.

unavailable

Which organization first popularized the term ESG in 2004?

United Nations

What is one reason why ESG ratings for the same company might differ among rating agencies?

Different agencies have varying standards and methodologies for measuring ESG factors

A firm with strong diversity and inclusion policies is likely to perform well in which area of ESG?

Social

Which of the following types of owners cannot be engaged in managing the business?

A limited partner

Which of the following business organizational forms create a tax liability on income at the personal income tax rate?

sole proprietorship and partners

Which of the following is a basic source of funds for a firm

debt and equity

Working capital management decisions help determine

how a firm's day-to-day financial matters should be managed