Question: A good financial decision will do the following for a firm:

Answer: Increase the value of the firm and increase shareholders’ equity.

Question: The responsibility of financial managers is to increase the value of:

Answer: Common Stock

Question: The conflict of interest between and agent and a principal is called a:

Answer: agency problem

Question: Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley?

Answer: Enron, WorldCom, and Tyco

Question: The relationship between stockholders and management can be described as a ___ relationship.

Answer: Agency

Question: Which of the following are considered stakeholders in a company?

Answer: Government, Employees, and Suppliers.

Question: True or False: The Sarbanes-Oxley Act provides incentives for companies to go public in US markets.

Answer: False

Question: The Sarbanes-Oxley Act requires corporate officers to:

Answer: Confirm the validity of the financial statements and be responsible for errors in the annual report.

Question: The costs incurred due to the conflict of interest between stockholders and management are called:

Answer: agency costs

Question: The threat of _____ motivates managers to make good decisions.

Answer: a hostile takeover