Chapters 1-2 Flashcards
- Institutional investors are important in today’s business world because
as a group they can vote large blocks of stock for the election of board members.
- Who is accountable for social responsibility within a firm?
The board of directors
- Companies that perform well
can minimize dilution when issuing new shares and can issue debt at a lower interest rate.
- Capital markets do not include which of the following securities?
Commercial paper
- One of the major advantages of a sole proprietorship is
low operating costs
The internationalization of the financial markets has
allowed firms such as McDonald’s to raise capital around the world.
- Agency problems are least likely to arise in which organizational form?
Sole proprietorship
- Increased productivity due to technology has?
helped to keep corporate costs in check.
- The Internet has affected the financial markets by?
creating more competition between markets.
pushing the cost of trading down.
forcing brokerage companies to consolidate.
- A corporation is
owned by stockholders who enjoy the privilege of limited liability.
easily divisible between owners.
a separate legal entity with unlimited life.
- Agency theory examines the relationship between the
owners of the firm and the managers of the firm.
- Future financial managers will need to understand
international cash flows.
computerized funds transfers.
international currency hedging strategies.
- Which of the following is not a true statement about the goal of maximizing shareholder wealth?
It is a short-run point of view
- With an S corporation
income is taxed as direct income to stockholders.
- Credit default swaps are
an insurance product designed to protect financial institutions from customers who default on their loans.
Which of the following did not contribute to the financial crisis?
Extension of credit to high-risk borrowers
Solid credit ratings from the ratings agencies
The merger of JPMorgan Chase and Bear Stearns
All of the options contributed to the financial crisis.
What is financial capital as defined in the financial industry?
Money
The Dodd-Frank Act is also known as the Wall Street Reform and Consumer Protection Act of 2010.
True
During times of inflation consumer prices decrease gradually over time.
False
The largest percentage of businesses in the U.S. are corporations.
false
The major focus of the Sarbanes-Oxley Act is to make sure publicly-traded corporations accurately only present the assets of a company.
False
Corporate finance is any decision that impacts the finances of a business.
True
