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Answer Key to Midterm 1

Answer Key to Midterm 1 - Midterm 1 Managerial Finance FRL...

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1 Midterm 1 Managerial Finance, FRL 300 February 1, 2010 1. Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? A. articles of incorporation B. corporate breakdown SECTION A: Multiple Choices (1 point each) C. agency problem 2. Which one of the following statements concerning a sole proprietorship is correct? A. A sole proprietorship is designed to protect the personal assets of the owner. B. The profits of a sole proprietorship are subject to double taxation. D. bylaws E. legal liability C. The owner of a sole proprietorship is personally responsible for all of the company's debts. 3. Why should financial managers strive to maximize the current value per share of the existing stock? C. because they have been hired to represent the interests of the current shareholders 4. Which one of the following parties has ultimate control of a corporation? D. because this will increase the current dividends per share E. because managers often receive shares of stock as part of their compensation E. shareholders
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