Corporate finance test bank ch1

A Yes, as long as the value of the firm's equity increases, society is better off.

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Limited liability 2. Section Reference: Financial Instruments and Markets 29 Which is the only province where trades in unlisted securities need to be reported?

This borrowing transaction is an example of: a Indirect intermediation b Direct intermediation c External intermediation d Market transaction Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries.

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A An advantage to incorporation is that it allows for less regulation of the business. Not authorized for sale or distribution in any manner.

Answer: Stock exchanges are auction markets. This implies that differences in consumption patterns can be adjusted in the capital markets. Section Reference: Financial Instruments and Markets 19 Though they are classified as equity, why are preferred shares also similar to debt? D bankers. Which one of the following statements is correct concerning the organizational structure of a corporation? It actually did a good job after the financial crisis. Answer: C Diff: 1 Section: 1. This borrowing transaction is an example of: a Indirect intermediation b Direct intermediation c External intermediation d Market transaction Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Briefly discuss principal-agent problems as related to a corporation. Given this, all investors will agree that they are better off if the firm maximizes their current wealth, i. It also arises as a result of informational asymmetry between managers and other stakeholders of a firm. Answer: 1. C a moral hazard. Section Reference: Financial Instruments and Markets 25 Which of the following was not one of the major objectives in the restructuring of the Canadian stock exchanges in and ? It is important because it provides liquidity to investors.

The appropriate balance between present and future consumption that each individual will choose depends on personal preferences. The person generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures is the: A. All rights reserved.

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B an adverse selection problem. Section Reference: Financial Instruments and Markets 25 Which of the following was not one of the major objectives in the restructuring of the Canadian stock exchanges in and ? Answer: b Type: Concept Level of Difficulty: Difficult Learning Objective: Identify the basic types of financial instruments that are available and explain how they are traded. Section Reference: Financial Instruments and Markets 24 Which of the following is an existing stock exchange in Canada? If an efficient secondary market did not exist, investors would be very reluctant to hold securities with longer maturities. Answer: B Diff: 1 Section: 1. Individuals II. Nevertheless, individuals with different preferences can adjust their preferences using the financial market. Answer: c Type: Concept Level of Difficulty: Easy Learning Objective: Identify the basic types of financial instruments that are available and explain how they are traded. The value of net financial assets held by non- residents is equal to the negative of the sum of the net financial assets of government, businesses, and households. Meanwhile, individuals favoring future consumption can refrain from current consumption and invest in the same financial market. The vice president of. Financial markets accelerate, simplify, and reduce the cost of contact between borrowers and lenders. Diff: 3 Section: 1. Hence, shareholders incur monitoring and bonding costs, which are a part of agency costs.
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Corporate Finance Test Bank Ch1