Fin 200 Assignment Loan Scenarios

Front 1

Get complete A+ tutorial here - http://entire-courses.com/FIN-200-Assignment-Loan-Scenarios

Back 1

This file of FIN 200 Assignment Loan Scenarios contains: Midland Chemical Co.

Front 2

Get complete A+ tutorial here - http://entire-courses.com/FIN-200-Assignment-Loan-Scenarios

Back 2

Business - General Business 1. Which of the following statements is CORRECT? Answer One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners. There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of new asset investments a firm makes. Bondholders are generally more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns. Stockholders are generally more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns. Relative to sole proprietorships, corporations generally face fewer regulations, and this makes it easier for corporations to raise capital. 1. Which of the following statements is CORRECT? Answer Capital market instruments include both long-term debt and common stocks. An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift. The NYSE does not exist as a physical location; rather, it represents a loose collection of dealers who trade stocks electronically. If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction. While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors. 1. Which of the following statements is CORRECT? Answer It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. Corporate shareholders are exposed to unlimited liability. Corporations generally face fewer regulations than sole proprietorships. Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship. 1. Which of the following is a primary market transaction? Answer You sell 200 shares of IBM stock on the NYSE through your broker. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE. 1. Which of the following statements is CORRECT? Answer The New York Stock Exchange is an auction market with a physical location. Capital market transactions involve only the purchase and sale of equity securities, i.e., common stocks. If an investor sells shares of stock through a broker, then this would be a primary market transaction. Consumer automobile loans are evidenced by legal documents called "promissory notes," and these individual notes are traded in the money market. While the distinctions are blurring as investment banks are today buying commercial banks, and vice versa, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. 1. With which of the following statements would most people in business agree? Answer A corporation’s short-run profits will almost always increase if the firm takes actions that the government has determined are in the best interests of the nation. Firms and government agencies almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees. Although people’s moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. It is not useful for a large corporation to develop a formal set of rules defining ethical and unethical behavior. Such rules generally can't be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. “Whistle blowers,” because of the courage it takes to blow the whistle, are generally promoted more rapidly than other employees. 1. Which of the following statements is CORRECT? Answer Corporations generally are subject to fewer regulations and more favorable tax treatment than sole proprietorships and partnerships. This is why corporations do most of the business in the United States. Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value than are managers who do not face the threat of hostile takeovers. One advantage of the corporate form of organization is that liability of the owners of the firm is limited to their investment in the firm. Because of their simplified organization, it is easier for sole proprietorships and partnerships to raise large amounts of outside capital than it is for corporations. Bond covenants are an effective way to resolve conflicts between shareholders and managers. 1. Which of the following statements is CORRECT? Answer One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. Sole proprietorships are subject to more regulations than corporations. In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. Corporations of all types are subject to the corporate income tax. 1. Which of the following statements is CORRECT? Answer The corporate bylaws are a standard set of rules established by the state of incorporation. These rules are identical for all corporations in the state, and their purpose is to ensure that the firm’s managers run the firm in accordance with state laws. The corporate charter is a standard document prescribed by the state of incorporation, and its purpose is to ensure that the firm’s managers run the firm in accordance with state laws. Procedures for electing corporate directors are contained in bylaws, while the declaration of the activities that the firm will pursue and the number of directors are included in the corporate charter. Companies must establish a home office, or domicile, in a particular state, and that state must be the one in which most of their business (sales, manufacturing, and so forth) is conducted. Attorney fees are generally involved when a company develops its charter and bylaws, but since these documents are voluntary, a new corporation can avoid these costs by deciding not to have either a charter or bylaws. The corporate charter is concerned with things like what business the company will engage in, whereas the bylaws are concerned with things like procedures for electing the board of directors. 1. Which of the following statements is CORRECT? Answer If expected inflation increases, interest rates are likely to increase. If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. If companies have fewer good investment opportunities, interest rates are likely to increase. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills. 1. You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this transaction? Answer This is an example of an exchange of physical assets. This is an example of a primary market transaction. This is an example of a direct transfer of capital. This is an example of a money market transaction. This is an example of a derivatives market transaction. 1. One drawback of switching from a partnership to the corporate form of organization is the following: Answer It subjects the firm to additional regulations. It cannot affect the amount of the firm's operating income that goes to taxes. It makes it more difficult for the firm to raise additional capital. It makes the firm’s investors subject to greater potential personal liabilities. It makes it more difficult for the firm’s investors to transfer their ownership interests. 1. Which of the following statements is CORRECT? Answer In a regular partnership, liability for other partners’ misdeeds is limited to the amount of a particular partner’s investment in the business. Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm’s debts in the event of bankruptcy. A major disadvantage of all partnerships relative to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. 1. Which of the following statements is CORRECT? Answer If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction. If you purchased 100 shares of Disney stock from your brother-in-law, this would be an example of a primary market transaction. The IPO market is a subset of the secondary market. Only institutions, and not individuals, can participate in derivatives market transactions. As they are generally defined, money market transactions involve debt securities with maturities of less than one year. 1. Which of the following statements is CORRECT? Answer Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate in one of these forms rather than as a corporation. However, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships. Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S. businesses (in terms of number of businesses) are organized as corporations. Due to legal considerations related to ownership transfers and limited liability, most business (measured by dollar sales) is conducted by corporations in spite of large corporations’ often less favorable tax treatment. Large corporations are taxed more favorably than sole proprietorships. Corporate stockholders are exposed to unlimited liability.

Front 3

Get complete A+ tutorial here - http://entire-courses.com/FIN-200-Assignment-Loan-Scenarios

Back 3

Try to be creative if you're dating when you're in college. Picnics or potlucks are just as much fun as fine restaurants or expensive dates. It is not only romantic, but inexpensive too. If roommates are an issue, strike a bargain. You can do them a favor later on.