Name Choose the one alternative that best completes the statement or answers the

Question

Name Choose the one alternative that best completes the statement or answers the question. 1) A fim's capital structure refers to the firm's: proportions of financing from current and long-term debt and combination of accounts appearing on the left side of its balance sheet. C) combination of cash and cash equivalents. D) mixture of various types of production equipment. E) investment selections for its excess cash reserves. 2) Which one of these statements is correct? (A'The value of an investment by a firm depends on the size, the timing, and the risk of t Accountants always record sales and expenses only after the related cash flows occur investment's cash flows. All overseas operations present the same amount of risk. D) Most investors prefer greater risk over less risk. E) When selecting one of two projects, managers should only consider the total cash flo each. 3) One intent of the Sarbanes Oxley Act of 2002 is to: A) prevent minority investors from making demands'on corporations rotect investors from corporate abuses. protect corporate directors from frivolous lawsuits. require all public corporations to "go dark" within the next 20 years. B) require repayment of all personal loans to corporate officers and directors 4) Which one of the following business types is best suited to raising large amounts of ca A) general partnership ) limited liability company C) corporation D) sole proprietorship E) limited partnership 5) Which one of the following actions by a financial manager creates an agency proble A) refusing to lower selling prices if doing so will reduce the net profits B) increasing current costs in order to increase the market value of the stockhold C) agreeing to pay bonuses based on the market value of the company's stock D) refusing to borrow money when doing so will create losses for the firm agreeing to expand the company at the expense of stockholders' value

Explanation / Answer

Answers:

1) A) A firm's capital structure refers to a proportion of financing from current and long term debt and equity. It is a mix of both debt based and equity based capital.

2) A) The value of an investment of a firm shall depend upon size, timing and risk of the investment's cash flows. All the investors shall prefer cashflows generated at the earliest.

3) B) Sarbanes-Oxley Act protects the investors from corporate abuses and frauds by affixing personal accountability on the board of the corporation.

4) C) Corporations are best suited to raise huge capital and to go for large scale projects since there is a lot of public investments in such corporation and therefor access to capital is available with ease.

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