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Financial Management Firm Organization False. The Form Essay

Financial Management

Firm Organization

False. The form of business organization direct affects the taxation structure of the firm, particularly with regard to flow-through taxation on some forms (sole proprietorship, most partnerships) and not on others (most corporations).

Firm Organization

False. The partners in a regular partnership have a high degree of liability.

Partnership

True. Most partnerships remains fairly small due to these constraints.

Proprietorship

True. In a sole proprietorship, the owner holds all the capital, making it difficult to raise from outside sources, and the proprietor has all the liability associated with the business.

Limited Liability

False. The owners do see their risk reduced by limited liability, but the firm still has this risk. Therefore, the firm's value should not be reduced. The firm can still be bankrupted, leaving potential owners with nothing.

Value Maximization

a. True. Earnings per share has a strong correlation with the firm's stock price. A firm that has the objective of maximizing shareholder wealth will also be seen by investors as having good growth potential, all other factors being equal.

1.4 Financial intermediaries

a. True

1.8 Financial markets

b. False

1.8 Financial markets

a. True. The part where Hale sells to the investment banker is a primary market transaction.

1.11 Stock market transactions

a. True

1.2 Partnership

b. False Partnerships still have difficulty raising large amounts of capital

1.2 Proprietorship

a. True

Multiple Choice:

1.2 Firm Organization

13. C.

1.2 Firm Organization

14. A

1.2 Firm Organization

15. D

1.2 Firm Organization

16. C

1.2 Firm Organization

17. A

1.2 Firm organization

18. C

1.4 Financial transactions

19. B

1.6 Interest rates

20. A

1.7 Hedge Funds

21. E

1.8 Money markets

22. D

1.8 Financial markets

23. B

1.8 Financial markets

24. E

1.8 financial markets

25. c

1.9 Financial markets

26. A

1.9 Financial markets

27. A

1.9 Financial markets

28. E

1.2 Forms of organization

29. A

1.2 forms of organization

30. C

1.2 Partnership

31. B

1.2 Partnership

32. D

1.2 Firm organization

33. C

1.2 Firm organization

34. B

1.2 Corporate charter

35. E

1.3 Business ethics

36. C

1.3 Goal of firm

37. A

1.3 Goals

38. D

1.6 Security Prices

39. E

1.6 Interest rates

40. D

1.6 Interest rates

41. E

1.8 Financial transactions

42. D

1.3 Misc

43. C

1.3 Misc

44. E

1.3 Misc

45. D

1.8 Ownership

46. B

47. NOPAT = Operating profit x (1 - Tax Rate)

700 x (1-.35) = $455 (E)

48. NOPAT = Operating profit x (1 - Tax Rate)

150 x (1-.4) = $90 ( c )

49. NOPAT = Operating profit x (1 - Tax Rate)

150 x (1-.4) = $90 ( c )

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