ScienceEconomicsFinance 325 Chapter 1 HW
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Finance 325 Chapter 1 HW

Ace Foster avatar Ace Foster
25 July 2022
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question
Which is defined as the management of a firm's long-term investments?
answer
Capital budgeting
question
Which is defined as the mixture of a firm's debt and equity financing?
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Capital structure
question
Which is defined as a conflict of interest between the corporate shareholders and the corporate managers?
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Agency Problem
question
Which is a capital budgeting decision?
answer
Deciding whether or not to purchase a new machine for the production line.
question
Which one of the following is a capital structure decision?
answer
Determining how much debt should be assumed to fund a project.
question
Which of the following accounts are included in working capital management?
answer
Accounts payable, accounts receivable, inventory
question
Which one of the following is a working capital management decision?
answer
Determining whether to pay cash for a purchase or use the credit offered by the supplier.
question
Which one of the following best states the primary goal of financial management?
answer
Maximize the current value per share.
question
Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?
answer
Increase in the market value per share.
question
Why should financial managers strive to maximize the current value per share of the existing stock?
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Because they have been hired to represent the interests of the current shareholders.
question
Which one of the following actions by a financial manager is most apt to create an agency problem?
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Increasing current profits when doing so lowers the value of the firm's equity.
question
Which one of the following is an agency cost?
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Hiring outside accountants to audit the company's financial statements.
question
Which of the following represent cash outflows from a corporation?
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Payment of dividends and Payment of government taxes
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Which one of these is a working capital management decision?
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Determining the minimum level of cash to be kept in a checking account.
question
A business created as a distinct legal entity and treated as a legal "person" is called a:
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Corporation
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Which of the following are advantages of the corporate form of business ownership?
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Limited liability for firm debt, ability to raise capital, unlimited firm life
question
Which one of the following is a primary market transaction?
answer
Sale of a new share of stock to an individual investor.