Financial Management Exam 1
Study online at https://quizlet.com/_i20b03
1. An employee stock option plan is ________________.: A way to align the interests of employees
with those of the owners
2. The practice generally known as double taxation is due to: corporate incomes being
taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
3. Methods to minimize agency problem include all except ________________.
a. Allow the CEO to purchase stock via an employee stock option plan
b. Award the CEO stock options
incorrect
c. Offer the managers an equity stake in the firm
d. Allow the CEO to purchase bonds via an employee bond option pla: Allow the
CEO to purchase bonds via an employee bond option plan
4. These individuals follow a firm, conduct their own evaluations of the compa-
ny's business activities, and report to the investment community.: Investment analysts
5. The most common type of business in the United States is the __________.: Sole
Proprietorship
6. Which of the following statements is incorrect?
a. All of these statements are correct.
b. Shareholders are responsible for paying off the corporate bonds in the event
of a bankruptcy.
c. Both angel investors and venture capitalists exchange capital for ownership.
d. Sole proprietorships are subject to less regulation.: Shareholders are responsible for
paying off the corporate bonds in the event of a bankruptcy.
7. Not all cash a company generates will be returned to the investors. Which of
the following will NOT reduce the amount of capital returned to the investors?
a.taxes
b. None of these will reduce the amount of capital returned to the investors.
c. dividends
d. retained earnings: Dividends
8. This group is elected by stockholders to oversee management in a corpora-
tion.: Board of Directors
1/3
Study online at https://quizlet.com/_i20b03
1. An employee stock option plan is ________________.: A way to align the interests of employees
with those of the owners
2. The practice generally known as double taxation is due to: corporate incomes being
taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
3. Methods to minimize agency problem include all except ________________.
a. Allow the CEO to purchase stock via an employee stock option plan
b. Award the CEO stock options
incorrect
c. Offer the managers an equity stake in the firm
d. Allow the CEO to purchase bonds via an employee bond option pla: Allow the
CEO to purchase bonds via an employee bond option plan
4. These individuals follow a firm, conduct their own evaluations of the compa-
ny's business activities, and report to the investment community.: Investment analysts
5. The most common type of business in the United States is the __________.: Sole
Proprietorship
6. Which of the following statements is incorrect?
a. All of these statements are correct.
b. Shareholders are responsible for paying off the corporate bonds in the event
of a bankruptcy.
c. Both angel investors and venture capitalists exchange capital for ownership.
d. Sole proprietorships are subject to less regulation.: Shareholders are responsible for
paying off the corporate bonds in the event of a bankruptcy.
7. Not all cash a company generates will be returned to the investors. Which of
the following will NOT reduce the amount of capital returned to the investors?
a.taxes
b. None of these will reduce the amount of capital returned to the investors.
c. dividends
d. retained earnings: Dividends
8. This group is elected by stockholders to oversee management in a corpora-
tion.: Board of Directors
1/3
