Question 1

Between 2008-2009 there were several ethical issues that caused the financial collapse. All of the following are a breach of financial ethics except:

Accepted Answer

A)  collateralized mortgage obligation scandal
B)  Treasury bond trading scandal
C)  insider stock trading scandal
D)  economic stimulus package scandal

Question 2

A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers

Accepted Answer

A)  the timing and the risk of the expected benefits to be received
B)  the investor's consumption utility
C)  the value of closely held partnerships
D)  all the above

Question 3

Many small business owners are diversified with respect to their personal wealth.

Accepted Answer

A)  poorly
B)  highly
C)  well
D)  90%

Question 4

Corporate officers normally include all the following except:

Accepted Answer

A)  Secretary
B)  Chief operating officer
C)  Treasurer
D)  Financial analyst

Question 5

The definition of the marginal analysis principle is that financial decisions are made and actions are taken

Accepted Answer

A)  within the global economic viewpoint.
B)  with regard to governmental laws and cultural effectiveness.
C)  when the added benefits exceed the added costs.
D)  based on the impact of public opinion.

Question 6

What are the shortcomings in the profit maximization objective as a managerial strategy?

Accepted Answer

1.Profit maximization lacks a time dimen...

Question 7

The limitations of the profit maximization goal include:

Accepted Answer

A)  It lacks a time dimension (i.e., it is static) 
B)  It fails to consider risk
C)  The definition of profit is ambiguous
D)  All the above are limitations

Question 8

The has a goal of serving as a bridge between academic study of finance and the application of financial principles by financial managers.

Accepted Answer

A)  Financial Executives Institute
B)  Financial Management Association
C)  American Finance Association
D)  Institution of Financial Analysts

Question 9

The activities of the treasurer include all of the following except:

Accepted Answer

A)  financial planning
B)  tax preparation
C)  credit analysis
D)  pension fund management

Question 10

The primary reason for the divergence between the shareholder wealth maximization goal and the actual goals pursued by management has been attributed to

Accepted Answer

A)  separation of social responsibility and stakeholders' concerns
B)  separation of ownership and control
C)  separation of personal welfare and long-run profit goals
D)  the granting of "golden parachute" contracts

Question 11

Concern for the interests of the shareholder can be viewed as the means to the end of:

Accepted Answer

A)  maximizing long-term shareholder wealth
B)  diminishing marginal return
C)  maximizing risk
D)  continuing legal litigation

Question 12

arise from the divergent objectives between owners and managers.

Accepted Answer

A)  Shareholder relationships
B)  Stakeholder problems
C)  Creditor problems
D)  Agency problems

Question 13

Giving top management is one method that ensures managers will act in the interest of shareholders in merger decisions.

Accepted Answer

A)  "golden parachute" contracts
B)  excellent pay
C)  executive perks
D)  job security

Question 14

There are three forms of business organization.Which of the following has unlimited liability?

Accepted Answer

A)  Only statement I is correct
B)  Only statement II is correct
C)  Both statements I and II are correct
D)  Neither statement I nor II is correct

Question 15

Financial decisions should be consistent with the goal of shareholder wealth maximization.However, there may be a divergence between shareholder wealth maximization and the actual goals of management.The primary reason for this is:

Accepted Answer

A)  Management wants to ensure good public relations.
B)  The Board of Directors is becoming increasingly uninvolved within the corporation.
C)  Shareholders do not feel that wealth maximization is relevant.
D)  There is a separation of ownership and control in corporations.

Question 16

are largely outside of the direct control of managers.

Accepted Answer

A)  investment strategies
B)  economic environment factors
C)  major policy decisions
D)  dividend policies

Question 17

An economic principle used in finance is:

Accepted Answer

A)  Full utilization of data processing
B)  Marginal analysis where marginal costs are set equal to marginal revenues.
C)  Accrual basis of recognizing revenues and expenses
D)  Target capital structure

Question 18

The managerial decision that emerges from the microeconomic profit maximization model is:

Accepted Answer

A)  Marginal Costs 
B)  Marginal Costs = Profits
C)  Marginal Revenues > Marginal Costs
D)  Marginal Costs = Marginal Revenue

Question 19

The net present value of an investment made by a firm represents the contribution of that investment to the of the firm.

Accepted Answer

A)  book value
B)  profit
C)  value
D)  cash flow

Question 20

The two most important disciplines on which financial management relies are

Accepted Answer

A)  accounting and production
B)  accounting and marketing
C)  economics and marketing
D)  accounting and economics

Exam 1: The Role and Objective of Financial Management

are largely outside of the direct control of managers.

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arise from the divergent objectives between owners and managers.

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What are the shortcomings in the profit maximization objective as a managerial strategy?

Correct Answerverified1.Profit maximization lacks a time dimen...View AnswerShow Answer

Concern for the interests of the shareholder can be viewed as the means to the end of:

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An economic principle used in finance is:

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Giving top management is one method that ensures managers will act in the interest of shareholders in merger decisions.

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There are three forms of business organization.Which of the following has unlimited liability?

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The activities of the treasurer include all of the following except:

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The definition of the marginal analysis principle is that financial decisions are made and actions are taken

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The net present value of an investment made by a firm represents the contribution of that investment to the of the firm.

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The limitations of the profit maximization goal include:

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The has a goal of serving as a bridge between academic study of finance and the application of financial principles by financial managers.

Correct AnswerverifiedShow Answer

The two most important disciplines on which financial management relies are

Correct AnswerverifiedShow Answer

Financial decisions should be consistent with the goal of shareholder wealth maximization.However, there may be a divergence between shareholder wealth maximization and the actual goals of management.The primary reason for this is:

Correct AnswerverifiedShow Answer

The managerial decision that emerges from the microeconomic profit maximization model is:

Correct AnswerverifiedShow Answer

A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers

Correct AnswerverifiedShow Answer

Between 2008-2009 there were several ethical issues that caused the financial collapse. All of the following are a breach of financial ethics except:

Correct AnswerverifiedShow Answer

Many small business owners are diversified with respect to their personal wealth.

Correct AnswerverifiedShow Answer

Corporate officers normally include all the following except:

Correct AnswerverifiedShow Answer

The primary reason for the divergence between the shareholder wealth maximization goal and the actual goals pursued by management has been attributed to

Correct AnswerverifiedShow Answer

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1.Profit maximization lacks a time dimen...
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