Exam 1: Getting Started-Principles of Finance

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

The financial manager should examine available risk-return trade-offs and make his decision based upon the greatest expected return.

For these types of organization,no distinction is made between business and personal assets.

The Sarbane-Oxley Act addresses insider trading by members of Congress.

In efficient markets,price adjustments to new information are gradual.

Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?

Only a few financial decisions involve some sort of risk-return tradeoff.

Why do you think many companies compensate executives with options based on long-term increases in the value of the company's stock?

The sole proprietorship is the same as the individual for liability purposes.

In regard to the agency problem,________ are the principal owners of a corporation.

A sole proprietorship is the most desirable business form in all circumstances.

Which of the following is NOT an advantage of the sole proprietorship?

Limited partners may actively manage the business.

Working capital management refers to

From a financial point of view,a company that decides to develop new product is making

In measuring value,the focus should be on

The goal of profit maximization is equivalent to the goal of maximization of share value.

Which of the following best describes the goal of the firm?

Rewarding executives for increasing quarterly earnings will motivate them to act in the long-term best interests of shareholders.

Which of the following types of business forms is least risky to investors?