fundamentals of corporate finance 11th canadian edition By Stephen A. Ross Test bank
208) C
209) C
210) A
211) D
212) B
213) A
214) D
215) D
216) C
217) B
218) C
219) D
220) C
221) A
222) E
223) D
224) A corporation is a business created as a distinct legal operating unit that is owned by one or more individuals or entities. Advantages include: ownership can be easily transferred; life of a corporation is not limited to lives of owners or managers; a corporation has limited liability; the ability to raise and access large sums of capital in both debt and equity markets. Disadvantages include: double taxation; lenders view the limited liability as a disadvantage and require the owners of small corporations to make personal guarantees; more complex and expensive form of organization to establish.
225) The articles of incorporation must contain a number of things, including the corporation's name, its intended life (which can be forever), its business purpose, and the number of shares that can be issued.
226) The advantages of the corporation include: limited liability for firm debt; Ability to raise capital; Unlimited firm life.
227) Disadvantages of partnership include: limited life of the firm; personal liability for firm debt; lack of ability to transfer partnership interest.
228) Common elements include: method of taxation; limited life of business entity; personal liability.
229) The financial manager is responsible for: the amount of the cash flow; timing of the cash flow; likelihood of the cash flow being received; possibility that only a portion of the expected cash flow will be received.
230) The financial management function is usually associated with a top officer of the firm, such as a vice president of finance or some other chief financial officer (CFO). The CFO reports to the president, who is the chief operating officer (COO) in charge of day-to-day operations. The COO reports to the chairman, who is usually chief executive officer (CEO). The CEO has overall responsibility to the board. The CFO coordinates the activities of the treasurer and the controller. The controller's office handles cost and financial accounting, tax payments, and management information systems. The treasurer's office is responsible for managing the firm's cash, its financial planning, and its capital expenditures.
231) Hedge funds are largely unregulated and privately managed investment funds catering to sophisticated investors, which look to earn high returns using aggressive financial strategies prohibited by mutual funds. These strategies may include arbitrage, high levels of leverage, and active involvement in the derivatives market.
232) Chartered banks generate income from the spread between interest paid on deposits and interest earned on loans, from selling life insurance through their branch networks, and from services provided to corporate clients such as bank guarantees.
233) One problem with the triple bottom line is that the three separate measures cannot easily be added up. It is difficult to measure the planet and people accounts in the same terms as profits.
234) The triple bottom line consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time.
The triple bottom line suggests that firms should be focusing on three interdependent measures of success.
One is the traditional measure of corporate profit; the second is a measure of a firm's employees and a firm's responsibility throughout the organization. The third pertains to how environmentally responsible a firm has been.
The triple bottom line suggests that firms should be focusing on three interdependent measures of success.
One is the traditional measure of corporate profit; the second is a measure of a firm's employees and a firm's responsibility throughout the organization. The third pertains to how environmentally responsible a firm has been.
235) The three areas to be addressed are:
1. Capital budgeting: The financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.
1. Capital budgeting: The financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.
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