Finance 3000 Fall 26 Exam 1

Vocabulary practice flashcards covering corporate finance fundamentals, business entities, financial markets, regulatory frameworks, and financial statement metrics for Finance 3000 Exam 1.

Nishaa has been promoted and is now in charge of planning and managing her firms long-term investments. In other words, she is in charge of:

Capital budgeting

Uptown markets is financed with 45% debt and 55% equity. This mixture of debt and equity is referred to as:

Capital structure

Raleigh BBQ has 48000 in current assets and 39000 in current liabilities. Decisions related to these accounts are referred to as:

working capital management

Vera opened a used bookstore and is both the 100 percent owner and the stores manager. Which type of business entity does vera own if she is personally liable for all of the stores debts.

sole proprietorship

Deandre and mason will equally share in the deciison making and in the business profits or losses. which type of bsuienss did they create if they btoh have full personal liability for the firms debts?

general partnership

the potential conflict of interest between a firms owners and its managers is referred to as which type of conflict

Agency

The shareholders of Qiang's Markets would benefit if the firm were to be acquired by Better Foods. However, ,Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict

when conducting a financial analysis of a firm ,financial analysts:

frequently use accounting information

if you accept a job asa. domesntic security analyst for a brokerage firm, you are most likely owrking in which one of the following financial areas?

Investments

What function is generally a responsibility assigned to the corporate treasurer?

Capital expenditures

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?

cash management

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

Which one of the following is a capital structure decision?

Establishing the preferred debt-equity level

Working in capital management includes which of the following

Determining which customers will be granted credit

the daily financial operations of a firm are primarily controlled by managing the

working capital

A sole proprietorship

has its profits taxed as a personal income

which one of the following forms of business organization offers liability protection to some of its owners but not all of its owners?

Limited partnership

Which one of the following statements correctly applies to a sole proprietorship?

obtaining additional equity is dependent on the owners personal finanaces

in a general partnership, each partner is personally liable for:

the total debts of the partnership, even if he or she was unaware of those debts

which one of the following is the advantage of being a limited partner?

losses limited to capital invested

a corporation is:

a legal entity separate from its owners

which of the following is contained in the corporate bylaws:

procedures for electing corporate directors

one advantage of the corporate form of organization is the :

ability to raise larger sums of equity capital than other organizational forms

Corporate Shareholders:

have the ability to change the corporation's bylaws.

A LLC:

Prefers its profits be taxed as personal income to its owners

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation

The primary goal of financial management is to maximize:

the market value of existing stock

the primary goal of financial management is most associated with increasing the

market value of the firm

The goal of financial management is to increase:

Current market value per share

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firms financial statements

which one of the following best describes the primary intent of the Sarbanes-Oxley act of 2002?

increase the protections against corporate fraud

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

Basing management bonuses on the length of employment

Which one of the following is most apt to align managements priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for a minimum of three years

The least effective means of aligning management goals with shareholder interests is:

Automatically increasing management salaries on an annual basis

Levi had an unexpected surprise when he returned home this morning. he found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):

Stakeholder

One example of a primary market transaction would be the:

Sale of 1000 shares of newly issued stock by Alt Company to Miquel

You contact your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market

All over the counter sales occur in what market

dealer markets

the issuer of a security must be involved in what transactions involving that security?

Primary market

security dealers must do what

buy and sell from their own inventory

an auction market has what type of trading floor

physical trading floor

a private placement is most apt to involve:

a life-insurance company

what is the primary purpose of the NYSE

to match buyers with sellers

Which of the following is not a basic area of finance as described by the text?

Accounting

Which of the following statements regarding buy now pay later is most accurate

A) Kickstarter is an example of a BNPL company.

B) BNPL is not considered to be a part of fintech.

C) BNPL companies can work with retailers to fund purchases made by customers.

D) BNPL loans often carry a higher interest rate than a credit card.

E) BNPL loans tend to be less personalized than a credit card loan.

C (BNPL companies can work with retailers to fund purchases made by customers )

Which of the following is a list of records that are used to record trasnactions and by design is resistant to alteration and thus provides an accurate record of trasnactions?

A) Blockchain

B) Kickstarter

C) Insurtech

D) BNPL

E) STEM

A (Blockchain)

What is the term for a new form of business organization that is for-profit, but has three additional legal attributes: accountancy, transparency, and purpose?

B Corporation

Which of the following is an intangible fixed asset?

A) Inventory

B) Machinery

C) Copyright

D) Account receivable

E) Building

Copyright

Production equipment is classified as:

A tangible fixed asset

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firms net working capital:

Had to decrease

Shareholders equity is best defined as

the residual value of a firm

net working capital decreases when

a dividend is paid to current shareholders

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

A) Fixed expenses

B) Marginal tax rate

C) Net capital spending

D) Inventory

E) Depreciation

Depreciation

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?

Positive cash flow to stockholders

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

Positive cash flow from assets

Cash flow to creditors increases when:

Long term debt is repaid

Net Working Capital Formula

NWC= current assets- current liabilities

Total Assets Formula

Total Assets= Current Assets + Net Fixed Assets

Total Liabilities + Equity Formula

Total Liabilites + Equity = current liabilities + Long term debt + equity

Beginning Equity

BE= common stock + paid in surplus + RE