11 May WHICH FORM OF BUSINESS STRUCTURE FACES THE GREATEST AGENCY PROBLEMS?
Which of the following help convince managers to work in the best interest of
the stockholders?
I.
compensation based on the value of the stock II. stock option plans
III.
threat of a company takeover IV. threat of a proxy fight
a. I and
II only
b. III
and IV only
c. I,
II, and III only
d.I,
III, and IV onlyE.
I, II, III, and IV
52.
Which form of business structure faces the greatest agency problems?
a. sole
proprietorship
b. general
partnership
c. limited
partnershipD. corporation
e. limited
liability company
1-18
Chapter
001 Introduction to Corporate Finance
53.
Which of the following are agency costs?
I.
forgoing an investment opportunity which would add to the market value of the
owner’s equity
II.
paying a dividend to each of the existing shareholders
III.
purchasing new equipment which increases the value of each share of stock
IV.
hiring outside auditors to verify the accuracy of the company financial
statements
a. II
and III only
b. I
and III onlyC.
I and IV only
d. II
and IV only
e. I,
II, and IV only
54.
Which one of the following parties is considered a stakeholder of a firm?A.
employee
b. short-term
creditor
c. long-term
creditor
d.preferred
stockholder
e. common
stockholder
1-19
Chapter
001 Introduction to Corporate Finance
55.
Which of the following represent cash outflows from a firm? I. issuance of
securities
II.
payment of dividends III. new loan proceeds
IV.
payment of government taxes a. I and III only
B.
II and IV only
c. I and
IV only
d. I,
II, and IV only
e. II,
III, and IV only
56.
Which of the following represent means by which cash flows from a corporation
back into the financial markets?
I.
repayment of long-term debt II. payment of government taxes III. payment of
loan interest IV. sale of corporate stock
a. I
and II onlyB. I and III only
c. II
and IV only
d. I,
III, and IV only
e. I,
II, and III only
1-20
Chapter
001 Introduction to Corporate Finance
57.
Which one of the following is a primary market transaction? a. a dealer selling
shares of stock to an individual investor
B. a dealer buying newly issued shares of
stock from a corporation
c. an
individual investor selling shares of stock to another individual
d.a
bank selling shares of a medical firm to an individual
e. a
sole proprietor buying shares of stock from an individual investor
58.
The transfer of ownership of outstanding shares of a NYSE listed stock:
a. takes
place in the primary market.
b. occurs
in a dealer market.
C. is facilitated
in the secondary markets.
d.creates
an immediate tax liability for both the seller and the buyer.
e. is
referred to as a private placement.
59.
Which of the following statements concerning auction markets is (are) correct?
I. NASDAQ is an auction market.
II.
The NYSE is an auction market.
III.
All trades involve a dealer in an auction market.
IV.
An auction market is called an over-the-counter market. a. I only
B. II only
c. I and
III only
d. II
and III only
e. II
and IV only
1-21
Chapter
001 Introduction to Corporate Finance
60.
Which one of the following statements concerning stock exchanges is correct?
a. The
NYSE has more listed stocks than NASDAQ.
b. The
NYSE is a dealer market.
c. The
exchange with the strictest listing requirements is NASDAQ.D. Some large companies are listed on
NASDAQ.
e. Most
debt securities are traded on the NYSE.
61.
Dealer markets:
a. are
reserved strictly for trading debt securities.
b. only
exist outside of the United States.
C. are called over-the-counter markets.
d.include
the American and the Pacific Stock Exchanges.
e. list
only the securities of the largest firms.
62.
Which one of the following statements is correct concerning the NYSE?
A. A firm is
expected to have a market value for its publicly held shares of at least $100
millionto be listed on the NYSE.
b. The
NYSE is the largest dealer market for listed securities in the United States.
c. The
NYSE accounts for only 50 percent of the shares traded in the auction markets.
d.Any
corporation desiring to be listed on the NYSE can do so.
e. The
NYSE is an over-the-counter exchange functioning as both a primary and a
secondary market.
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