FIN 315 CH1-3

FIN 315 CH1-3 - Chapter1 -1 Most large businesses go...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter1 -------------------------------------------------------------------------------- 1 Most large businesses go through "life cycles," beginning as corporations, then converting to partnerships, and finally ending up as sole proprietorships, where one individual owns the entire firm. True or false? True False status: correct (1.0) correct: false your answer: false feedback: Correct. -------------------------------------------------------------------------------- 2 All large, publicly-owned corporations are "C Corporations," and they must pay corporate income taxes. Their after-tax income is taxed again when it is passed on to investors in the form of dividends, and this is called "double taxation." However, double taxation can be avoided provided a firm is small enough and has 75 or fewer stockholders, as it can then qualify as an S Corporation. As a result, most small corporations are S rather than C Corporations. True or false? True False status: correct (1.0) correct: true your answer: true feedback: Correct. -------------------------------------------------------------------------------- 3 For a publicly owned firm like GE, management's primary goal should be to maximize the wealth of its stockholders, which means maximizing the long-run value of the stock. True or false? True False status: correct (1.0) correct: true your answer: true
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
feedback: Correct. -------------------------------------------------------------------------------- 4 No one can be sure what's going to happen to any firm in the future. Therefore, all publicly-owned companies have about the same degree of risk. True or false? True False status: not answered () correct: false your answer: -------------------------------------------------------------------------------- 5 Although managers are supposed to try to maximize the prices of their firms' over the long run, some managers are apparently more interested in maximizing the stock price on the date when their options can be exercised. Stockholders, working through firms' boards of directors, should design compensation plans that minimize such behavior. True or false? True False status: not answered () correct: true your answer: -------------------------------------------------------------------------------- 6 Stocks have market prices, and they also have intrinsic values. If the market price is below the intrinsic value as estimated by marginal investors, and if the intrinsic value remains stable in the future, then there will be a tendency for the stock's price to fall over time. True or false? True False status: not answered () correct: false your answer:
Background image of page 2
-------------------------------------------------------------------------------- 7 In recent years there has been a decreased emphasis on corporate ethics and governmental oversight. This is because, after the Enron and WorldCom debacles, stockholders are sure that the managers of publicly-owned companies will always be scrupulously honest in their dealings with their stockholders. True or false?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 42

FIN 315 CH1-3 - Chapter1 -1 Most large businesses go...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online