My Finance Lab Homework Answers

Principles of Finance Homework: 1-2 MyFinanceLab Assignment 1. There are three basic questions that are addressed by the study of finance. They are: (select all that apply) A. Which parts of the company should receive less capital (capital rationing)? How should the firm raise money to fund new investments (capital structure decisions)? How can the firm best manage its cash flows as they arise in its day-to-day operations (working capital management decisions)? DWhat long-term investments should the firm undertake (capital budgeting decisions)? 2. Even if you are not planning a career in finance, a working knowledge of finance can be useful in both your personal and professional life for the following reasons: (select the best choice below) A. Even if you do not pursue a career in finance, you may find yourself working closely with finance managers. B. Financial management is a key component of other academic disciplines throughout your life. Knowledge of financial principles will help you make the right decisions. C. As an individual you will be faces with numerous financial decisions throughout your life. Knowledge of financial principles will help you make the right decisions. D. For those who plan to be entrepreneurs, managing company finances is crucial to the survival of the firm. (E) All of the above are correct. 3. Which of the following statements regarding a sole proprietorship are correct? (Select all the apply) A The sole proprietor is personally responsible for all debt of the sole proprietorship. B) Sources of funds for a sole proprietorship typically include personal savings, as well as raising funds from a bank or personal loans from friends and family. C. One advantage of the sole proprietorship is that the survival of the firm does not depend upon just one person. D. Sole proprietorships are easy to set up with no paperwork required before the business can be opened. 4. The typical business organization for large companies is the corporation. Advantages of the corporate form of business organization include: (select all the apply.) A The life of the business is not tied to the status of the corporate owners. B. Corporations have a greater ease in raising large sums of money than other forms of business organization. The owners' liability is limited to the amount of their investment in the company. D. The corporation is owned by the board of directors who share in the profits and the liabilities of the company. 5. One attractive alternative to the corporation for a small business is the because it combines the tax benefits of a partnership with the limited liability of a corporation. (Select the best choice below.) A. Sole proprietorship B. General partnership C. Limited liability company D. Limited partnership 6. The true owners of the corporation are the A. Holders of debt issues of the firm. B. Common stockholders. C. Board of directors of the firm. D. Preferred stockholders. 7. There are four basic principles of finance. Which principle correctly describes the following statement: "A dollar today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today"? (Select the best choice below.) A Principle 1: Money has a time value. B. Principle 2: There is a risk-return tradeoff. C. Principle 3: Cash flows are the source of value. D. Principle 4: Market prices reflect information. 8. Working capital management refers to A. Capital structure. B. Investing in product development. C The management of cash flows. D. Long-term financing decisions. 9. Finance managers need to interact constantly with A. Management information systems staff. B. Accounting staff. C. Marketing managers. All of the above. 10. The area of finance that deals with long-term investment decisions is known as A. Working capital management. 3 Capital budgeting. C. Capital structure. D. Financial strategy. 11. Managers of corporations need to act in an ethical manner A. Because ethics violations will be punished by the law. Because a business must be trusted by investors, customer, and the public if it is to succeed. C. Because business managers must answer to a higher authority. D. Because ethical behavior is its own justification. 12. Serious ethical violations by corporations such as Enron led to the passage of The Sarbanes-Oxley Act. B. The Dodd-Frank Act. C. The Insider Trading Act of 1988. D. All of the above.