Chapter 1

Capital structure decisions include determining:

Multiple Choice

• which one of two projects to accept.

• how to allocate investment funds to multiple projects.

• the amount of funds needed to finance customer purchases of a new product.

• how much debt should be assumed to fund a project.

• how much inventory will be needed to support a project.

• how much debt should be assumed to fund a project.

An example of a capital budgeting decision is deciding:

Multiple Choice

• how many shares of stock to issue.

• whether or not to purchase a new machine for the production line.

• how to refinance a debt issue that is maturing.

• how much inventory to keep on hand.

• how much money should be kept in the checking account.

• whether or not to purchase a new machine for the production line.

The decision to issue additional shares of stock is an example of:

Multiple Choice

• working capital management.

• a net working capital decision.

• capital budgeting.

• a controller's duties.

• a capital structure decision.

• a capital structure decision.

Working capital management decisions include determining:

Multiple Choice

• the minimum level of cash to be kept in a checking account.

• the best method of producing a product.

• the number of employees needed to work during a particular shift.

• when to replace obsolete equipment.

• if a competitor should be acquired.

• the minimum level of cash to be kept in a checking account.

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:

Multiple Choice

• corporation.

• sole proprietorship.

• general partnership.

• limited partnership.

• limited liability company.

• sole proprietorship.

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

Multiple Choice

• corporation.

• sole proprietorship.

• general partnership.

• limited partnership.

• limited liability company.

• general partnership.

A business created as a distinct legal entity and treated as a legal "person" is called a(n):

Multiple Choice

• corporation.

• sole proprietorship.

• general partnership.

• limited partnership.

• unlimited liability company.

• corporation.

A limited liability company:

Multiple Choice

• can only have a single owner.

• is comprised of limited partners only.

• is taxed similar to a partnership.

• is taxed similar to a C corporation.

• generates totally tax-free income.

• is taxed similar to a partnership.

Corporate dividends are:

Multiple Choice

• tax-free because the income is taxed at the personal level when earned by the firm.

• tax-free because they are distributions of aftertax income.

• tax-free since the corporation pays tax on that income when it is earned.

• taxed at both the corporate and the personal level when the dividends are paid to shareholders.

• taxable income of the recipient even though that income was previously taxed.

• taxable income of the recipient even though that income was previously taxed.

Financial managers should primarily focus on the interests of:

Multiple Choice

• stakeholders.

• the vice president of finance.

• their immediate supervisor.

• shareholders.

• the board of directors.

• shareholders.

Decisions made by financial managers should primarily focus on increasing the:

Multiple Choice

• size of the firm.

• growth rate of the firm.

• gross profit per unit produced.

• market value per share of outstanding stock.

• total sales.

• market value per share of outstanding stock.

he Sarbanes-Oxley Act of 2002 is a governmental response to:

Multiple Choice

• decreasing corporate profits.

• the terrorist attacks on 9/11/2001.

• a weakening economy.

• deregulation of the stock exchanges.

• management greed and abuses.

• management greed and abuses.

Agency problems are most associated with:

Multiple Choice

• sole proprietorships.

• general partnerships.

• limited partnerships.

• corporations.

• limited liability companies.

• corporations.