Chapter 1-The Scope of Corporate Finance: Multiple Choice

Chapter 1The Scope of Corporate Finance
MULTIPLE CHOICE
1. One of the tasks for financial managers when identifying projects that increase firm value is to identify those projects where
a. marginal benefits are at least equal to the projects marginal costs.
b. taking the project will increase the book value of the firms common stock.
c. taking the project wll decrease the book value of the firms debt outstanding.
d. none of the above
AN! A "#$! % &%$! 'earning Objectives
(. )hich finance career classification involves analy*ing a firms business processes and strategies as well as recommending a change in practice in order to make a firm more competitive+
a. corporate finance
b. commercial banking
c. investment banking
d. consulting
AN! " "#$! , &%$! 1.1 -areer Opportunities in $inance
.. #f you would like to work in finance by trading debt and equity securities for customers/ then which finance career classification should you target+
a. corporate finance
b. commercial banking
c. investment banking
d. money management
AN! - "#$! , &%$! 1.1 #nvestment 0anking
1. )hich form of invested capital is subject to most of the firms business and financial risk+
a. debt capital
b. equity capital
c. borrowed capital
d. intellectual capital
AN! 0 "#$! %
&%$! 1.( "ebt and %quity! 2he 2wo $lavors of -apital 3sed by All 0usinesses-areer Opportunities in $inance
4. )hich of the following is not a true capital5raising event for the firm+
a. primary market transaction
b. secondary market transaction
c. initial public offering
d. a corporate loan from a bank
AN! 0 "#$! % &%$! 1.( 2he 6rowing #mportance of $inancial ,arkets
7. 2he total value of primary stock and bond offerings sold by corporations and other entitites per year increased by a significant amount during the 188. 5(99. period. 2hat increase most
closely corresponds to
a. a factor of (.
b. a factor of 4.
c. a factor of 19.
d. a factor of (9.
AN! -
An increase from :491 billion to :4... trillion is best described by a factor of 19.
"#$! ; &%$! 1.( 2he 6rowing #mportance of $inancial ,arkets
<. )hich of the following is not one of the five basic corporate finance functions+
a. e=ternal financing function
b. captial budgeting function
c. risk management
d. auditing
AN! " "#$! , &%$! 1.( 2he $ive 0asic -orporate $inance $unctions
>. )illiam and 2heodore have decided to start a travel business called %=cellent Adventures. ince their business primarily involves time5travel their clients may be harmed during a small but
significant portion of the travels. -onsequently/ )illiam and 2heodore would like a business form that will shield their personal wealth from any legal claims that the firm might be subject
to after one of the travel mishaps. #f )illiam and 2heodore are the only investors in this 3.. domiciled firm/ which legal form of organi*ation would be best for %=cellent Adventures to
protect both )illiam and 2heodore+
a. sole proprietorship
b. partnership
c. limited partnership
d. corporation
AN! "
sole proprietorship 5 not possible with ( owners
partnership 5 has joint and several liability that will not help the owners
limited partnership 5 one partner must be the general partner and consequently could not protect both owners
corportion 5 has limited liability
"#$! ; &%$! 1.. 'egal $orms of 0usiness Organi*ations
8. )ithin a limited partnership conte=t/ what are the conditions on a limited partner+
a. 2here is a limit to the amount of capital that a limited partner can contribute/ as mandated by law.
b. 2here is a limit to the number of limited partners that the firm may take on as investors.
c. 2he limited partner must remain a low level employee and cannot ever serve in a managerial role in the firm.
d. A limited partner may not take any active role in the operation of the business.
AN! " "#$! ;
&%$! 1.. 'egal $orms of 0usiness Organi*ations/ ?artnerships
19. 2he rules dictating voting procedures and other aspects of corporate governance for a corporation are
a. the minutes of the board of directors meeting.
b. the corporate charter.
c. the #nstitute for -orporate 6overnance corporte governance procedures.
d. the ecurities and %=change -ommision rules for corporate governance.
AN! 0 "#$! ,
&%$! 1.. 'egal $orms of 0usiness Organi*ations/ -orporations
11. 2he ultimate owner@sA of an ongoing corporation are
a. the federal government.
b. the debt holders.
c. the equity holders.
d. the e=ecutive staff of the corporation.
AN! - "#$! %
&%$! 1.. 'egal $orms of 0usiness Organi*ations/ -orporations
1(. Agency costs refer to
a. the costs associated with managing the demands of federal agencies.
b. the costs involved when converting an entity from a proprietorship to a corporation.
c. the costs that arise due to conflicts of interest between shareholders and managers.
d. none of the above.
AN! - "#$! % &%$! 1.. -orporations/ agency cost definition
1.. ?rior to the 2a= &elief Act of (99./ if a corporation has pre5ta= earnings of :119/999 while the corporation is subject to a .4B income ta= rate and an investor is subject to a .4B personal
ta= rate/ then what is the after5ta= income that the investor could capture if all of the firms earnings are paid out in dividends+
a. :<1/499
b. :17/1<4
c. :11/..9
d. :1(/(>1
AN! 0
:119/999 C .74 C.74 D :17/1<4
"#$! , &%$! 1.. -orporations
11. ince the 2a= &elief Act of (99./ if a corporation has pre5ta= earnings of :119/999 while the corporation is subject to a .4B income ta= rate and an investor is subject to a .4B personal ta=
rate and a 14B capital gains ta= rate/ then what is the after5ta= income that the investor could capture if all of the firms earnings are paid out in dividends+
a. :8./499
b. :<1/499
c. :79/<<4
d. :17/1<4
AN! -
:119/999C.74C.>4 D :79/<<4
"#$! , &%$! 1.. -orporations
14. ince the 2a= &elief Act of (99./ if a corporation or partnership has pre5ta= earnings of :119/999 while the corporation is subject to a .4B income ta= rate and an investor is subject to a
.4B personal ta= rate and a 14B capital gains ta= rate/ then what is the advantage to being a partnership @compared to a corporationA if all of the proceeds are paid out to investors in either
legal form+
a. @:((/499A
b. :9
c. :19/<(4
d. :(1/<(4
AN! -
?artnership! :119/999 C .74 D :<1/499
-orporation! :119/999 C .74 C .>4 D :79/<<4
?artnership 5 -orporation D :<1/499 5 :79/<<4 D :19/<(4
"#$! ; &%$! 1.. 'egal $orms of 0usiness Organi*ations
17. )hich of the following characteristics would disqualify a firm from being an -orporation+
a. a firm with 41 different individual shareholders
b. the controlling majority shareholder is a $ortune 499 corporation
c. one of the shareholders of the proposed -orporation is an elected official
d. none of the above would disqualify a firm from qualifying as an -orporation
AN! 0 "#$! , &%$! 1.. -orporations
1<. )hich of the following is a valid criticism concerning the goal of firms to ma=imi*e profits+
a. profit ma=imi*ation ignores e=penses
b. profit ma=imi*ation is completely unrelated to shareholder wealth
c. profit ma=imi*ation may ignore the timing of those profits
d. there are no valid criticisms of profit ma=imi*ing firms
AN! - "#$! ,
&%$! 1.1 )hat hould a $inancial ,anager 2ry to ,a=imi*e+
1>. ,anagers of firms should only take actions that
a. increase the value of the firms future cash flows.
b. they e=pect will increase the firms share price.
c. have marginal benefits which are at least as great as the marginal cost of those actions.
d. all of the above
AN! " "#$! ,
&%$! 1.1 )hat hould a $inancial ,anager 2ry to ,a=imi*e+/ ,a=imi*e hareholder )ealth
18. )hich of the following parties have the proper incentives to make risky/ value increasing investments for the firm+
a. suppliers
b. creditors
c. shareholders
d. managers who are only compensated with a salary
AN! - "#$! ,
&%$! 1.1 )hat hould a $inancial ,anager 2ry to ,a=imi*e+/ ,a=imi*e hareholder )ealth
(9. An agent of a firm could be any of the following!
a. 199B owner of the firm
b. the #& agent in charge of auditing the firms ta= return
c. an employee who does not own any proportion of the firm
d. a supplier of the firm
AN! - "#$! ;
&%$! 1.1 ;ow -an Agency -osts 0e -ontrolled in -orporate $inance+
(1. hareholders can attempt to overcome agency problems by all but the following!
a. incurring costs to monitor managers
b. paying managers a good salary
c. relying on market forces to e=ert managerical discipline
d. paying the manager a proportion of the profits that the firm generates
AN! 0 "#$! ;
&%$! 1.1 )hat hould a $inancial ,anager 2ry to ,a=imi*e+/ 2ypes of Agency -osts
((. 2he arbanes5O=ley Act of (99(
a. established the ecurities and %=change -ommission.
b. requires -%O and -$Os of all large companies to personally certify their firms financial statements.
c. defined eithical behavior.
d. established that a -$O must be a member of the firms audit committee of the board of directors.
AN! 0 "#$! ,
&%$! 1.1 ;ow the arbanes5O=ley Act #s -hanging ;ow -orporate America -onducts 0usiness
(.. )hich of the following is one of the most e=pensive methods for the firm to overcome agency costs+
a. let the ecurities and %=change -ommission inform the firm of a problem
b. proper design of an e=ecutives compensation contract
c. monitor the e=ecutives work
d. require e=ecutives to own a large proportion of their firms outstanding shares
AN! 0 "#$! ;
(1. )hich of the following is the best bonding e=penditure to help limit agency costs+
a. auditing the managers work on a monthly basis
b. a contract whereby the manager will forfeit a portion of his deferred compensation in the event of poor performance
c. granting the manager a large number of options that will become valuable if the firm performs well
d. paying the manager a bonus if the firm performs well
AN! 0 "#$! ;
(4. A root cause of firm agency costs is
a. managerial carelessnes.
b. a manager owning too much of his firms stock.
c. a managers concern for his personal well5being.
d. federal agency filing requirements.
AN! - "#$! ;
(7. )hich of the following is a weakness of a sole proprietorship+
a. 3nlimited life
b. %asy to form
c. 'imited liability
d. 'imited access to capital
AN! " "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
(<. )hich of the following is a strength of a sole proprietorship+
a. 3nlimited life
b. %asy to form
c. 'imited liability
AN! 0 "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
(>. )hich of the following is a strength of the corporate form of business+
a. 'imited life of the business
b. 3nlimited access to capital
c. 3nlimited liability
d. "ouble ta=ation of income
AN! 0 "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
(8. )hich of the following is NO2 a strength of the corporate form of business+
a. 3nlimited life of the business
b. 3nlimited access to capital
c. 3nlimited liability
d. #ndividual contracting
AN! - "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
.9. )hat type of corporation allows shareholders to be ta=es as partners while retaining their limited liability status+
a. E -orporation
b. ''? -orporation
c. -orporation
d. eries 7 -orporation
.1. hareholders are said to have a residual claim on the firms assets. )hat does this mean+
a. hareholders have limited liability in their investment.
b. hareholders do not receive any payoff from the firm until all creditors are paid.
c. hareholders are allowed to recover their investment first if the firm e=periences financial distress.
d. hareholders have priority in electing the board of directors for the firm.
AN! 0 "#$! , &%$! 1.( -orporate $inance %ssentials
.(. )hat market is where transactions that generate new cash flow for the firm occur+
a. ?rimary market transactions
b. econdary market transactions
c. -ommodities market transactions
d. #nitial public offering transactions
AN! A "#$! , &%$! 1.( -orporate $inance %ssentials
... )hich type of finance position focuses on preparing firm financial plans and the evaluation of the firms financial ratios+
a. $inancial analyst
b. -apital budgeting analyst
c. -ash manager
d. ?ortfolio manager
AN! A "#$! ,
&%$! 1.1 2he &ole of -orporate $inance in ,odern 0usiness
.1. )hat of the following is $A'% regarding debt capital+
a. "ebt holders are required to receive interest payments at fi=ed intervals.
b. "ebt holders receive the amount of their loan @called principalA at the debts maturity date.
c. "ebt holders can force the firm into bankruptcy if interest payments are not made.
d. "ebt holders have voting rights for the firms board of directors.
AN! " "#$! , &%$! 1.( -orporate $inance %ssentials
.4. )hich of the following is $A'% regarding equity capital+
a. -ommon stock holders bear most of the firms business and financial risk.
b. ?referred stock holders receive a fi=ed annual payment on their invested capital.
c. -ommon stock holders have ownership in the firm by voting for the firms management.
d. ?referred stockholders can force the firm into bankruptcy if dividend payments are not paid.
.7. )hat was the key impact to the Eobs and 6rowth 2a= &econciliation Act of (99.+
a. #t greatly reduced the risk and liability of owning a small business.
b. #t provided ta= credits and incentives for corporations to maintain their operations in the 3nited tates.
c. #t reduced the effect of double ta=ation on corporate earnings by lowering the ta= rate on corporate dividends.
d. #t reduced ta=es in an effort to keep ocial ecurity solvent through (919.
.<. )hat is a fiduciary+
a. omeone who performs ratio analysis for a corporation.
b. omeone who invest and manages money on someone elses behalf.
c. omeone who manages the release of a initial public offering.
d. omeone who evaluates the performance of individual bonds.
AN! 0 "#$! %
.>. -alculate the ta= disadvantage to organi*ing a 3.. business today/ after passage of the Eobs and 6rowth 2a= &econciliation Act of (99./ as a corporation versus a partnership/ given the
following assumptions. All earnings will be paid out as dividends/ and operating income before ta=es will be :(99/999. 2he effective corporate ta= rate is .4B/ and the ta= rate on corporate
dividends is 14B. 2he average personal ta= rate for partners in the business is .4B.
a. :1</499
b. :18/499
c. :(9/999
d. :((/(49
AN! 0 "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
.8. -alculate the ta= disadvantage to organi*ing a 3.. business today/ after passage of the Eobs and 6rowth 2a= &econciliation Act of (99./ as a corporation versus a partnership/ given the
following assumptions. All earnings will be paid out as dividends/ and operating income before ta=es will be :<49/999. 2he effective corporate ta= rate is .4B/ and the ta= rate on corporate
dividends is 14B. 2he average personal ta= rate for partners in the business is .4B.
a. :7./1(4
b. :71/(49
c. :77/999
d. :<./1(4
AN! " "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
19. -alculate the ta= disadvantage to organi*ing a 3.. business today/ after passage of the Eobs and 6rowth 2a= &econciliation Act of (99./ as a corporation versus a partnership/ given the
following assumptions. All earnings will be paid out as dividends/ and operating income before ta=es will be :1/499/999. 2he effective corporate ta= rate is .4B/ and the ta= rate on
corporate dividends is 14B. 2he average personal ta= rate for partners in the business is .4B.
a. :117/(49
b. :14(/(49
c. :177/>49
d. :1<9/.<4
AN! A "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
11. 0efore passage of the Eobs and 6rowth 2a= &econciliation Act of (99./ some argued to completely eliminate the ta= rate on dividends. -alculate the ta= disadvantage to organi*ing a 3..
business today if the Eobs and 6rowth 2a= &econciliation Act of (99. passed with this provision. -onsider the following firm! All earnings will be paid out as dividends/ and operating
income before ta=es will be :1/499/999. 2he effective corporate ta= rate is .4B/ and the ta= rate on corporate dividends is 9B. 2he average personal ta= rate for partners in the business is
.4B. )hat is the ta= disadvantage+
a. :9
b. :<4/999
c. :199/999
d. :1(4/999
AN! A "#$! , &%$! 1.. 'egal $orms of 0usiness Organi*ations
1(. )hat is meant by the term Fdouble ta=ationG as applied to the corporate form of business organi*ation+
a. -orporate income as ta=ed at twice the rate of partnership income.
b. -orporate income is ta=ed/ and then corporate dividends are ta=ed as well.
c. -orporations pay both $ederal income ta= and state income ta= on their earnings.
d. -orporations pay both income ta= and sales ta=es on their goods.
AN! 0 "#$! % &%$! 1.( -orporate $inance %ssentials
1.. )hat is the proper goal for management of a firm+
a. ,a=imi*e shareholder wealth
b. ,a=imi*e net income or earnings
c. ,a=imi*e sales revenue
d. ,inimi*e e=penses
AN! A "#$! % &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
11. )hat is a basic guide for financial decision making+
a. ,ake decisions were the marginal benefits e=ceed the marginal costs.
b. ,ake decisions were the total benefits e=ceed the total costs.
c. ,ake decisions were the marginal benefits e=ceed the fi=ed costs.
d. ,ake decisions were the average benefits e=ceed the average costs.
AN! A "#$! %
14. )hat recent act has attempted to reduce the possibility of more accounting scandals in our economy+
a. 2a= &elief Act of (99.
b. #nternal Accounting tandards Act of (99(
c. ,c-ain5$eingold Act of (99.
d. arbanes5O=ley Act of (99(
AN! " "#$! % &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
17. )hat is a key provision regarding -%Os in the arbanes5O=ley Act of (99(+
a. -%Os cannot hold options in the firms they direct.
b. -%Os total compensation cannot e=ceed a limit set by the %-.
c. -%Os are personally liable for any mistakes on company financial filings.
d. -%Os are prohibited from commenting on company filings to the %-.
AN! - "#$! , &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
1<. )hich of the following describes the Fcollective action problemG+
a. )hen a -%O fails to represent the interest of shareholders in daily decisions of the firm.
b. )hen the shareholders of a firm fail to act in their own best interests.
c. )hen the managers of a firm lack incentive to ma=imi*e shareholder wealth.
d. )hen an individual stockholder spends time and resources monitoring managers/ bearing the cost/ while the benefits go to all the shareholders in the firm.
1>. 2o ma=imi*e the value of a business/ a firm needs access to capital and to minimi*e risk for investors. 6iven these guidelines/ which business form should ma=imi*e value for a firm+
a. ole proprietorship
b. 'imited partnership
c. 6eneral partnership
d. -orporation
AN! " "#$! ; &%$! 1.. 'egal $orms of 0usiness Organi*ations
18. )hat is the term applied to a firm that offers shares to the general public for the first time+
a. #nitial ?ublic Offering
b. #nitial ?laced Offering
c. #nvestment ?lan Offer
d. #nvestment of ?ublic Offers
AN! A "#$! , &%$! 1.( -orporate $inance %ssentials
49. )hich statement best describes the capital structure decision process for a firm+
a. 2he firm finds the least e=pensive debt to finance its projects.
b. 2he firm finds the mi= of debt and equity to ma=imi*e firm value.
c. 2he firm purchases the mi= of debt and equity to match the guidelines of the company charter.
d. 2he firm makes the necessary filings for an initial public offering.
AN! 0 "#$! , &%$! 1.( -orporate $inance %ssentials
41. )hich is not a duty of a financial manager+
a. 0udgeting
b. $inancial forecasting
c. ?roduct research
d. #nvestment analysis
AN! - "#$! % &%$! 1.( -orporate $inance %ssentials
4(. A business with a single owner is called a
a. partnership.
b. sole proprietorship.
c. corporation.
d. limited liability company.
AN! 0 "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
4.. )hich form of business organi*ation allows shareholders to be ta=ed as partners while still retaining their limited liability status+
a. -orporation
b. ?artnership
c. -orporation
d. ole ?roprietorship
AN! - "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
41. A corporation is a separate legal entity. )hat consequences does that have for the corporation+
a. #t can sue and be sued.
b. 2hey can own property.
c. a only
d. a and b
44. #n order to be eligible for status/ a firm must
a. have <4 or fewer shareholders.
b. be a financial intermediary.
c. have been incorporated for more than 4 years.
d. not have more than one line of business.
AN! A "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
47. )hich of the following represents career opportunities in finance+
a. -orporate finance
b. #nvestment banking
c. -onsulting
d. All of the above
AN! " "#$! %
4<. )hich of the following is not a career opportunity in corporate finance+
a. $inancial analyst
b. ,ortgage banker
c. -ash manager
d. -ontroller
AN! 0 "#$! %
4>. )hich of the following does not represent a career opportunity in money management+
a. ?ortfolio manager
b. ecurities analyst
c. $inancial planner
d. -apital budgeting analyst
AN! " "#$! %
48. )hat are the broad types of capital+
a. %quity
b. "ebt
c. Assets
d. a and b
AN! " "#$! % &%$! 1.( -orporate $inance %ssentials
79. )hat is considered a primary market transaction+
a. -orporations sell securities to investors in e=change for cash.
b. #nvestor A buys stock from investor 0.
c. A company declares a dividend.
d. A company makes a bank deposit.
AN! A "#$! % &%$! 1.( -orporate $inance %ssentials
71. -apital budgeting is the single most important activity of the firms financial manager. )hich of the following is not a part of the capital budgeting process+
a. #dentifying potential investments.
b. #dentifying investments that create shareholder value.
c. "eveloping new products.
d. #mplementing and monitoring the selected investments.
AN! - "#$! % &%$! 1.( -orporate $inance %ssentials
7(. Of the five basic corporate finance functions which deals with developing company wide structures that force managers to act ethically and to make decisions that further the interests of the
firms stockholders+
a. $inancing
b. -orporate governance
c. $inancial management
d. &isk management
AN! 0 "#$! % &%$! 1.( -orporate $inance %ssentials
7.. )hich of the following is not considered a weakness of the sole proprietorship+
a. 'imited life
b. 3nlimited personal liability
c. implicity
71. )hich of the following does not apply to a partnership+
a. 'imited life
b. 'imited access to capital
c. A single owner
d. 3nlimited personal liability
74. )hat are the responsibilities of the board of directors in a corporation+
a. ;ire and fire managers.
b. ,anage day5to5day operations.
c. Amend the firms corporate charter when necessary.
d. ;ire and fire entry level employees.
AN! A "#$! % &%$! 1.. 'egal $orms of 0usiness Organi*ations
77. )hich of the following is not true about common stockholders and preferred stockholders+
a. ?referred stockholders receive a fi=ed dividend each year.
b. -ommon stockholders vote to elect the members of the board of directors.
c. ?referred stockholders have a more senior claim on the firms assets in the event of bankruptcy.
d. ?referred stockholders are considered the firms ultimate owners.
7<. )hat is the goal of financial management+
a. ,a=imi*e corporate profits.
b. ,a=imi*e shareholder wealth.
c. ,inimi*e costs.
d. ,a=imi*e earnings.
AN! 0 "#$! % &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
7>. Iou were just hired as the -%O of a company. Iour primary objective should be
a. to ma=imi*e the companys earnings.
b. to ma=imi*e profits.
c. to ma=imi*e the companys price of common stock.
d. to eliminate the companys competitors.
78. )hat should be the objective of a focus on stakeholders+
a. ,a=imi*e the stakeholders interests.
b. #n situations of conflict pick stakeholders interests over shareholders interests.
c. ?reserve stakeholders interests.
d. "isregard shareholders interests all together.
<9. #n which form of business organi*ation is a agency problem most likely to occur+
a. ole proprietorship
b. -orporation
c. ?artnership
d. 'imited liability company
AN! 0 "#$! , &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
<1. )hich of the folowing scenarios could be considered an e=ample of an agency problem.
a. ,anagement decides to close a plant to lower operating costs.
b. ,anagement decides to go ahead with an e=pansion that is e=pected to benefit the companys value.
c. 2he board of directors rewards management for the companys last year performance.
d. ,anagement decides to purchase a 0oeing <1< as a corporate plane.
AN! " "#$! , &%$! 1.1 2he -orporate $inancial ,anagerHs 6oals
<(. )hich of the following encourages managers to act in the shareholders interests+
a. ?erformance based compensation.
b. Audits.
c. 2hreat of hostile takeovers.
d. All of the above.
<.. )hich law did congress pass in (99( to enforce ethical behavior in corporate finance+
a. 2he Eobs and 6rowth &elief &econciliation Act
b. 2he $inancial ervices ,oderni*ation Act
c. 2he ?atriot Act
d. 2he arbanes5O=ley Act
<1. )hy do shareholders bear most of the risk of running a firm+
a. 2hey only have a residual claim on the firms cash flows.
b. 2hey receive a salary from the company.
c. 2hey are guaranteed a fi=ed payout each quarter.
d. hares can be taken away at any time without notice.
<4. )hat do we call the possible conflict of interests between shareholders and management+
a. Agency problem.
b. takeholder problem
c. "ouble ta=ation
d. hareholders dilemma

Chapter 1-The Scope of Corporate Finance: Multiple Choice

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Chapter 1The Scope of Corporate Finance

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