Topic 10 - Corporate

What is the main goal of corporate finance?

• Maximize revenue

• Minimize costs

• Maximize shareholder value

• Increase employee salaries

Which business structure provides limited liability to all owners?

• Sole Proprietorship

• Partnership

• Limited Liability Company

• Unlimited Company

What is a disadvantage of the corporate form of business?

• Unlimited life

• Limited liability

• Double taxation

• Ease of ownership transfer

Who is typically elected by shareholders to monitor management decisions?

• CEO

• Board of Directors

• CFO

• COO

What financial statement shows a firm’s assets and liabilities at a specific point in time?

• Income Statement

• Cash Flow Statement

• Balance Sheet

• Statement of Retained Earnings

Which term refers to the conflict between shareholders and management?

• Agency cost

• Agency problem

• Liquidity risk

• Moral hazard

What is the tax rate on a corporation’s taxable income of $1,000 if the company tax rate is 33%?

• 25%

• 30%

• 33%

• 40%

What is the effective tax rate if a corporation pays both company and personal taxes?

• 45%

• 50%

• 61.8%

• 70%

What is the primary objective of financial management?

• Increase employee satisfaction

• Maximize firm value

• Reduce tax liability

• Minimize operational costs

Which financial management decision involves determining the firm’s long-term investments?

• Investment decision

• Financing decision

• Working capital decision

• Dividend decision