Assignment 01 - An Overview of Financial Management Term Answer Description Finance A. This entity, which is legally separate from its managers and owners, is authorized by a state to conduct business. Corporation B. This goal of financial management is measured by the effect of a decision or an action on the price of the fir m on stock. Treasurer In larger organizations, this officeholder supervises the firm's credit and inventory managers, as well as the director of capital budgeting, and reports to the firm's chief financial officer. Limited liability D. Business ethics E. This collection of principles, practices, and procedures is used to influence the behavior of employees toward the firm's stakeholders. An investor's personal responsibility for the business's liabilities can never be less than zero or more than the amount invested in the firm's common shares Limited partner F. This term describes individuals and groups, both internal and external to the company, whose support is critical to the success of the organization O G. It addresses how money is raised and used by individuals, businesses, and governments. Double taxation of dividends Shareholder wealth maximization Stakeholder H. This is the worth of a good or service as established by the discounted and current value of the item's cash flows. I. This tax situation currently applies to corporations and their owners but not to sole proprietorships, partnerships, or their owners. This is a participant in a partnership, whose personal assets may not be seized to satisfy the debts of the partnership. Value ]. The chief financial officer in a company's responsible for which of the following departments? Check all that apply: arch a The chief Financial officer in a company is responsible for which of the following departments? Check all that apply: Credit O Treasury Administration Capital budgeting 5. Intrinsic values an The intrinsic value of a combu stock, also known as its fundamental value, refers to the stock's true value based on expected future cash flows and the risks involved. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued The goal of the managers of a publicly owned company should be to maximize the firm's An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc.'s stock should be $25.00 per share, but Mandalays Inc.'s stock is trading at $18.95 per share on the New York Stock Exchange (NYSE). Considering the analyst's expectations, the stock is currently: O In equilibrium O Overvalued Undervalued The following graph shows a stock's actual market price and intrinsic value over time. The intrinsic value comes from another research analyst. Use the dropdown menus on the graph to label the periods in which the stock was undervalued or overvalued STOCK PRICE (Dollars) The following graph shows a stock's actual market price and intrinsic value over time. The intrinsic value comes from another research analyst. Use the dropdown menus on the graph to label the periods in which the stock was undervalued or overvalued. STOCK PRICE (Dollars) 40 Actual Stock Price Intrinsic Value 22 20 2000 2001 2002 2003 2004 2005 YEARS Ethics deals with questions of right or wrong behavior. Which of the following behaviors involves ethical--as opposed to unethical-decision making? O While interviewing prospective applicants for a manager-trainee position, the company's recruiter makes sexually suggestive remarks to the applicants and recommends hiring only the good-looking candidates. While planning for an upcoming company audit, a manager insists on hiring an external auditing firm to audit the company's financial statements. O While considering the purchase of an expensive piece of equipment, a firm's purchasing manages recommends that the purchase be made from his cousin's firm rather than from one of two other vendors offering the identical equipment at lower prices. While riding in a taxi, a loan officer with the Fifth County Bank finds a briefcase containing the confidential and proprietary lending policies of a competing bank. Instead of returning the briefcase, she keeps the competing bank's information and distributes it at the next loan application review meeting. In 2002, in response to an outbreak of corporate scandals and unethical financial and accounting behavior, Congress passed the Sarbanes-Oxley Act. Which of the following is a major provision of this legislation? O A publicly traded corporation must hire an external auditing firm to render an unbiased and independent opinion regarding the firm's financial statements. A publicly traded corporation must have a board of directors composed solely of inside directors to oversee the firm's annual audit, because insiders know best about how the company does its business O Most executives believe do so. How can a firm's ethico their firms behave in an ethical manner and that it is in their best interests to d uct increase its long-term profitability? Good ethics programs are developed from the bottom of the organization up to the firm's leadership. This is because lower-level workers do all the actual work and are in the best position to specify the rules of how the work should be conducted. Ethical corporate behavior attracts Customers, employees, and communities who appreciate and support being treated ethically. As Aa Executive compensation en tie performance to bonus and incentive awards, supplemental retirement packages, perquisites, and Serance pay, in order to encourage the management team to align their performance with organizational goals. Which of the following compensation proposals is most likely to be in the best interest of the company's shareholders? O A base salary of $500,000 plus perquisites worth $250,000 A base salary of $500,000 plus a stock option package for 250,000 shares, with 20% of shares maturing at the end of each of the next five years A base salary of $500,000 plus a stock option package for 250,000 shares that mature in six months O Vision Tech is a software company based out of San Francisco. Its stockholders are mostly individual investors and there is relatively little institutional ownership. If several pension and mutual funds were to take large positions in Vision Tech's stock, would direct shareholder intervention be more or less likely to motivate the firm's management? More likely Less likely Vision Tech's stock price is currently trading at $22 per share. The consensus among analysts is that the intrinsic value of Vision Tech's stock is $28 per share. Is Vision Tech more or less likely to receive a hostile takeover bid? More likely Less likely o search