Charles Gibson Financial Statement Analysis Chapter 5
CHAPTER 1
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AN OVERVIEW OF FINANCIAL MANAGEMENT 1. Which of the following statements is CORRECT? a. In most corporations, the CFO ranks above the CEO.
b. By law in most states, the chairman of the board must also be the CEO.
c. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person.
d. The CFO generally reports to the firm 's chief accounting officer, who is normally the controller.
e. The CFO is responsible for raising capital and for making sure that capital expenditures are desirable, but he or she is not responsible for the validity of the financial statements, as the controller and the auditors have that responsibility.
Answer: c 2. Which of the following statements is CORRECT? a. One drawback of forming a corporation is that it generally subjects the firm to additional regulations.
b. One drawback of forming a corporation is that it subjects the firm’s investors to increased personal liabilities.
c. One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital.
d. One advantage of forming a corporation is that it subjects the firm’s investors to fewer taxes.
e. One disadvantage of forming a corporation is that this makes it more difficult for the firm’s investors to transfer their ownership interests.
Answer: a
Corporations have to do more reporting to state and
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AN OVERVIEW OF FINANCIAL MANAGEMENT 1. Which of the following statements is CORRECT? a. In most corporations, the CFO ranks above the CEO.
b. By law in most states, the chairman of the board must also be the CEO.
c. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person.
d. The CFO generally reports to the firm 's chief accounting officer, who is normally the controller.
e. The CFO is responsible for raising capital and for making sure that capital expenditures are desirable, but he or she is not responsible for the validity of the financial statements, as the controller and the auditors have that responsibility.
Answer: c 2. Which of the following statements is CORRECT? a. One drawback of forming a corporation is that it generally subjects the firm to additional regulations.
b. One drawback of forming a corporation is that it subjects the firm’s investors to increased personal liabilities.
c. One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital.
d. One advantage of forming a corporation is that it subjects the firm’s investors to fewer taxes.
e. One disadvantage of forming a corporation is that this makes it more difficult for the firm’s investors to transfer their ownership interests.
Answer: a
Corporations have to do more reporting to state and