Exam 1: The Goals and Functions of Financial Management

One advantage of the corporate form of organization is that income received by shareholders is not taxable since the corporation already paid taxes on the income distributed.

The first Nobel Prizes given to finance professors was for their contributions to capital structure theory and portfolio theories of risk and return.

As mergers, acquisitions, and restructurings have increased in importance, agency theory has become more important in assessing whether:

Agency theory examines the relationship between:

A limited partnership limits the profits partners may receive.

Agency theory examines the relationship between the owners of the firm and the managers of the firm.

What are the characteristics of a sole proprietorship? What are the drawbacks?

Corporate restructuring in the late 1990s more often took the form of:

Capital markets refer to those markets dealing with short-term securities having a life of one year or less.

Maximization of shareholder wealth is a concept in which:

A corporate restructuring can result in:

Selecting profit maximization as the primary goal of the firm may not increase its value, because a profit-only focus has several drawbacks. List and describe these drawbacks.

Agency theory would imply that conflicts are more likely to occur between management and shareholders when:

Maximizing the earnings of the firm is the goal of financial management.

Increased use of technology has increased corporate efficiency by:

Financial management builds upon the disciplines of economics and accounting. Complete the following statements:

List the 4 components of good corporate governance and identify additional measures that could be added to strengthen corporate governance.

The largest financial intermediaries after the banks are insurance companies.

The most common partnership arrangement carries limited liability to the partners.

The 1990s demonstrated that the old valuation models were no longer effective.