BWFF2023: Practice 1

The treasurer of a corporation generally reports directly to the:

• board of directors

• chief executive officer

• chairman of the board

• vice president of finance

An example of a capital budgeting decision is deciding:

• how much money should be kept in the checking account

• how many shares of stock to issue

• how much inventory to keep on hand

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

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

• working capital

• capital structure

• debt

• capital budgeting

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

• working capital management

• cost analysis

• capital structure

• capital budgeting

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

• working capital management

• capital budgeting

• capital constraints

• capital structure

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

• corporation.

• sole proprietorship.

• limited partnership.

• general partnership.

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

• market value per share of outstanding stock

• growth rate of the firm

• total sales

• size of the firm

Abigail, Blake and Camila plan to launch a business. Abigail will fund the venture but wants to limit her liability to her initial investment. She has no interest in the daily operations. Blake will contribute his full efforts on a daily basis but has limited funds to invest in the business. Camila will be involved as a consultant and manager and will also contribute funds. Blake and Camila are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to minimize the initial costs of organizing the business. Which form of business entity should these individuals adopt?

• Sole proprietorship

• Limited partnership

• Corporation

• General partnership

Which of the following actions would be most likely to decrease agency costs for the firm?

• Increase employees’ salaries to exceed the salaries paid by competitors

• Prohibit employees from becoming shareholders of the firm

• Pay bonuses to employees only if profits increase from one year to the next

• Reward high performing employees with shares of stock

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:

• took place in the primary market

• involved a proxy

• occurred in a dealer market

• was facilitated in the secondary market