Exam 1: An Overview of Financial Management

If a lower level person in a firm does something illegal,like "cooking the books" to understate costs and thereby increase profits above the correct profits ,ecause he or she was told to do so by a superior,the lower level person cannot be prosecuted but the superior can be prosecuted.

Which of the following statements is CORRECT?

Which of the following actions would be likely to reduce potential conflicts of interest between stockholders and managers?

One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt.This problem would be avoided if you formed a corporation to operate the business.

A hostile takeover is said to occur when another corporation or group of investors gains voting control over a firm and replaces the old managers.If the old managers were managing the firm inefficiently,then hostile takeovers can improve the economy.However,hostile takeovers are controversial,and legislative actions have been taken to make them more difficult to undertake.

With which of the following statements would most people in business agree?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following could explain why a business might choose to operate as a corporation rather than as a proprietorship or a partnership?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

An advantage of the corporate form of organization is that corporations are generally less highly regulated than proprietorships and partnerships.

If someone deliberately understates costs and thereby increases profits,this can cause the stock price to rise above its intrinsic value.The stock price will probably fall in the future.Also,those who participated in the fraud can be prosecuted,and the firm itself can be penalized.

As a result of financial scandals occurring during the past decade,there has been a strong push to improve business ethics.

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders?

Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders?

Which of the following actions would be likely to encourage a firm's managers to make decisions that are in the best interests of shareholders?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?