Homework 1.2

A  The Sarbanes−Oxley Act

B  All of these

C  the Insider Trading Act of 1988

D  The Dodd−Frank Act

A  because a business must be trusted by​ investors, customer and the public if it is to succeed.

B  because business managers must answer to a higher authority.

C  because ethics violations will be punished by the law.

D  because ethical behavior is its own justification.

A  financial strategy.

B  capital structure.

C  capital budgeting.

D  working capital management.

A  none of these

B  marketing managers.

C  all of these

D  management information systems staff.

E  accounting staff.

A  long−term financing decisions.

B  capital structure.

C  investing in product development.

D  the management of cash flows.

A  Principle​ 2: There is a​ risk-return tradeoff.

B  Principle​ 3: Cash flows are the source of value.

C  Principle​ 1: Money has a time value.

D  Principle​ 4: Market prices reflect information.

A  preferred stockholders.

B  common stockholders.

C  holders of debt issues of the firm.

D  board of directors of the firm.

A  limited partnership

B  sole proprietorship

C  limited liability company

D  general partnership

A  The corporation is owned by the board of directors who share in the profits and the liabilities of the company
The owners’ liability is limited to the amount of their investment in the company.
The life of the business is not tied to the status of the corporate owners.

B  Corporations have a greater ease in raising large sums of money than other forms of business organization.
The owners’ liability is limited to the amount of their investment in the company.
The corporation is owned by the board of directors who share in the profits and the liabilities of the company

C  Corporations have a greater ease in raising large sums of money than other forms of business organization.
The owners’ liability is limited to the amount of their investment in the company.
The life of the business is not tied to the status of the corporate owners.

A  Sole proprietorships are easy to set up with no paperwork required before the business can be opened.
The sole proprietor is personally responsible for all debt of the sole proprietorship.
Sources of funds for a sole proprietorship typically include personal savings, as well as raising funds from a bank or personal loans from friends and family.

B  Sole proprietorships are easy to set up with no paperwork required before the business can be opened.
One advantage of the sole proprietorship is that the survival of the firm does not depend upon just one person.
Sources of funds for a sole proprietorship typically include personal savings, as well as raising funds from a bank or personal loans from friends and family.

C  One advantage of the sole proprietorship is that the survival of the firm does not depend upon just one person.
The sole proprietor is personally responsible for all debt of the sole proprietorship.
Sources of funds for a sole proprietorship typically include personal savings, as well as raising funds from a bank or personal loans from friends and family.

A  All of these are correct.

B  For those who plan to be​ entrepreneurs, managing company finances is crucial to the survival of the firm.

C  As an individual you will be faced with numerous financial decisions throughout your life. Knowledge of financial principles will help you make the right decisions.

D  Financial management is a key component of other academic disciplines such as​ management, marketing, production and operations​ management, and accounting.

E  Even if you do not pursue a career in​ finance, you may find yourself working closely with finance managers.

F  None of these are correct

A  Which parts of the company should receive less capital (capital rationing)?
What long-term investments should the firm undertake (capital budgeting decisions)?
How can the firm best manage its cash flows as they arise in its day-to-day operations (working capital management decisions)?

B  How should the firm raise money to fund new investments (capital structure decisions)?
What long-term investments should the firm undertake (capital budgeting decisions)?
How can the firm best manage its cash flows as they arise in its day-to-day operations (working capital management decisions)?

C  How should the firm raise money to fund new investments (capital structure decisions)?
What long-term investments should the firm undertake (capital budgeting decisions)?
Which parts of the company should receive less capital (capital rationing)?