Question Details

Question
1. What are the two basic sources of funds for all businesses?
Debt
Equity
Both debt and equity
None of the above
True or False
2. Working capital management is the management of current assets, such as inventory, and current liabilities, such as money owed to suppliers.
True
False 
3. What are the forms of business organization discussed in this chapter?
Sole Proprietorship
Partnership
Corporation
All of the above
4. What is meant by stockholders’ limited liability?
That the stockholder- legal liability extends to all personal assets as well.
That the stockholder- legal liability extends only to the debt owed.
That the stockholder- legal liability extends only to the capital contributed or the amount invested.
None of the above
5. What is double taxation?
The employees of a corporation are subject to double taxation--first when they get their paychecks and then when they pay state and federal income tax.
The owners of a corporation are subject to double taxation—first at the corporate level and then again at a personal level when they are given dividends.
The suppliers of a corporation are subject to double taxation—first when the corporation pays their invoices and then again when they have to pay federal taxes.
None of the above
6. What are some of the regulations pertaining to boards of directors that were put in place to reduce agency conflicts?
The majority of board members must be outsiders.
A separation of the CEO and chairman of the board positions is recommended.
The CEO and CFO must certify all financial statements.
All of the above
7. Which one of the following mechanisms helps to align management interests with those of its shareholders?
A well designed management compensation package
An efficient managerial labor market
The Sarbanes-Oxley Act of 2002
All of the above
8. One of the best ways to reduce agency conflict is by
designing an effective compensation package
instituting severe penalties for bad decisions
hiring outside monitors to keep track of the manage's decisions
having managers report to the board of directors
9. Which of the following factors or activities can be controlled by the management of the firm?
The level of economic activity
Stock market conditions
Capital budgeting
The level of interest rates
10. Current Liabilities are liabilities that will be converted to cash within a year
True
False