Exam 1: An Introduction to the Foundations of Financial Management

Profits are down so the controller decides to change the corporation's accounting policy relating to inventory costing.The change will allow the corporation to report higher income and higher assets,although the physical inventory has not changed.Which of the following statements is MOST correct?

Capital budgeting is concerned with

A corporate financial manager trying to maximize shareholder value

As of today,the most severe economic crisis to afflict the United States economy is considered to be

In which of the following cases will the agency problem between shareholders and managers be the greatest?

The sole proprietorship has no legal business structure separate from its owner.

The owners of a corporation enjoy limited liability.

Ethical behavior

Shareholder selection committees select potential board of director nominees ensuring that board members will monitor management sufficiently to protect shareholder interests.

Investors generally don't like risk.Therefore,a typical investor

Which of the following forms of business organization has the greatest ability to attract new capital?

Fortunately,Europe was largely shielded from the economic recession that afflicted the world economy in 2007.The European economies contracted less and have recovered much more rapidly than their counterparts in the United States and China.

All of the following forms of business organizations provide limited liability to all owners EXCEPT

Advantages of the corporate form of business organization include

The best form of business entity to attract new capital is the sole proprietorship because investors only need to deal with one owner.

Which of the following is NOT considered to be a disadvantage of the sole proprietorship form of business organization?

Suppose XYZ Corporation is traded on the New York Stock Exchange.XYZ's closing price on Monday is $20 per share.After the market closes on Monday,XYZ makes a surprise announcement that it has obtained a major new customer.XYZ's stock will likely

Giving the company's CEO stock options as part of his or her compensation package is an example of an agency cost.

While many factors contributed to the financial crisis of 2007 and beyond,it is safe to say that real estate loans were NOT much of a contributing factor.

Underemployment is a term used to describe hiring employees who work for a designated foreman or team leader.In this sense they are employed under a specific individual.