1- Which statement is correct?

A/Management compensation based on performance is not considered an appropriate means for mitigating the agency problem between stockholders and management.

B/An agency problem does not exist if the manager owns less than 100% of the shares outstanding.

C/The agent hires the principal to act in the agent's best interests.

D/When discussing the relationship between management and shareholders, the shareholders are considered the principal.

2- Which organizational form of business must pay corporate taxes?

A/Corporations only

B/Corporations and Partnerships

C/Partnerships only

D/Sole Proprietorships only

3- Which statement is not true?

A/Existing shares of Apple stock can be bought in the secondary market.

B/An intial public offering (IPO) is sold in the primary market.

C/A general partner has limited liability.

D/Sole proprietorships have a limited lifespan.

4- Management's primary goal should be?

A/Maximize earnings per share by only issuing one share of stock.

B/To retain all earnings and never pay dividends.

C/Inflate the stock price by any means possible.

D/ Maximize shareholder value which encompasses a number of issues.

5- If the current ratio equals 1.00, which statement is true?

A/The net working capital is zero.

B/The change in net working capital is negative, which is considered bad.

C/The change in net working capital is zero.

D/The net working capital is negative.