Question 1

Among the most important agency relationships in the context of finance is (are)  the relationship(s)  between ____.

Accepted Answer

A)   stockholders and creditors
B)   management and workers
C)   stockholders and creditors, and management and workers
D)   management and creditorsE) A) and C)
F) None of the above

Question 2

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 economicsE) A) and D)
F) C) and D)

Question 3

The major factors that determine the market value of a company's shares of stock include the ____.

Accepted Answer

A)   risk of its cash flows
B)   timing of its cash flows
C)   book value of its assets
D)   risk of its cash flows and the timing of its cash flowsE) All of the above
F) C) and D)

Question 4

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" contractsE) All of the above
F) C) and D)

Question 5

The type of corporate security that pays periodic interest as well as the eventual return of principal is:

Accepted Answer

A)   Preferred stock
B)   Debt Securities
C)   Equity Securities
D)   Fixed asset loansE) A) and C)
F) A) and B)

Question 6

Agency problems may give rise to costs that ____ the market value of firms.

Accepted Answer

A)   increase
B)   decrease
C)   do not affect
D)   are not important toE) All of the above
F) C) and D)

Question 7

In a limited partnership, the limited partners may limit their:

Accepted Answer

A)   tax liability
B)   liability
C)   tax write-off
D)   ability to attract new productsE) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A)   poorly
B)   highly
C)   well
D)   90%E) A) and B)
F) B) and C)

Question 9

Preferred stock is considered priority stock. Explain this priority.

Accepted Answer

Common stock is a residual form of owner...

Question 10

The existence of divergent objectives between owners and managers is one example of a class of problems arising from ____.

Accepted Answer

A)   social responsibility concerns
B)   age differences between managers and owners
C)   agency relationships
D)   union-management relationsE) All of the above
F) C) and D)

Question 11

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 aboveE) B) and D)
F) None of the above

Question 12

The objective of maximizing shareholder wealth, as measured by the market value of the firm's stock

Accepted Answer

A)   does not consider the timing of the benefits received
B)   provides a way to consider the risk of the returns being offered
C)   benefits only certain stockholders
D)   neither considers the timing of the benefits received nor benefits only certain stockholdersE) None of the above
F) B) and C)

Question 13

The shareholder wealth maximization goal states that management should seek to maximize the ____ of the expected future returns to the owners of the firm.

Accepted Answer

A)   Future value
B)   Compound value
C)   Percentage value
D)   Present valueE) B) and C)
F) All of the above

Question 14

All of the following are problems with the microeconomic profit maximization model except:

Accepted Answer

A)   the absence of a time dimension
B)   offers financial managers insights to a wide range of problems
C)   does not consider the risk of alternative decisions
D)   the problem of defining profitsE) C) and D)
F) A) and B)

Question 15

There are five competitive forces that influence an industry's structure.

Accepted Answer

1. The threat of new entrants....

Question 16

Shareholder wealth is measured by the ____.

Accepted Answer

A)   book value of the shareholders' common stock holdings
B)   market value of the shareholders' common stock holdings
C)   book value of the company's assets
D)   market value of the company's assetsE) B) and C)
F) A) and B)

Question 17

One method of decreasing the cash outflows of a firm is to

Accepted Answer

A)   decrease depreciation
B)   increase capital expenditures
C)   decrease dividends
D)   increase debt repaymentE) None of the above
F) A) and D)

Question 18

There are three major factors that determine the market value of a company's share of stock. All of the following are factors EXCEPT:

Accepted Answer

A)   Cash flows
B)   Sales generated
C)   Timing of cash flows
D)   Risk taken to generate cash flowsE) B) and C)
F) A) and C)

Question 19

A company that requires that its top officers own common stock in the company that is at least equal to their annual salary is:

Accepted Answer

A)   Ford Motor Company
B)   Tucson Electric Power Company
C)   Panhandle Eastern
D)   Anheuser-BuschE) C) and D)
F) A) and B)

Question 20

What is the function of the CFO?

Accepted Answer

A)   Control of the accounting functions of the firm.
B)   Effective communication with the investment community about the firm's performance.
C)   Oversight of the financial statements.
D)   Determination of effective tax reduction strategies.E) A) and C)
F) A) and B)

Exam 1: The Role and Objective of Financial Management

What is the function of the CFO?

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There are five competitive forces that influence an industry's structure.

Correct Answerverified1. The threat of new entrants....View AnswerShow Answer

In a limited partnership, the limited partners may limit their:

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One method of decreasing the cash outflows of a firm is to

Correct AnswerverifiedShow Answer

A company that requires that its top officers own common stock in the company that is at least equal to their annual salary is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The major factors that determine the market value of a company's shares of stock include the ____.

Correct AnswerverifiedShow Answer

The objective of maximizing shareholder wealth, as measured by the market value of the firm's stock

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

There are three major factors that determine the market value of a company's share of stock. All of the following are factors EXCEPT:

Correct AnswerverifiedShow Answer

The existence of divergent objectives between owners and managers is one example of a class of problems arising from ____.

Correct AnswerverifiedShow Answer

The shareholder wealth maximization goal states that management should seek to maximize the ____ of the expected future returns to the owners of the firm.

Correct AnswerverifiedShow Answer

The type of corporate security that pays periodic interest as well as the eventual return of principal is:

Correct AnswerverifiedShow Answer

All of the following are problems with the microeconomic profit maximization model 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

Agency problems may give rise to costs that ____ the market value of firms.

Correct AnswerverifiedShow Answer

Preferred stock is considered priority stock. Explain this priority.

Correct AnswerverifiedCommon stock is a residual form of owner...View AnswerShow Answer

Shareholder wealth is measured by the ____.

Correct AnswerverifiedShow Answer

Among the most important agency relationships in the context of finance is (are) the relationship(s) between ____.

Correct AnswerverifiedShow Answer

The two most important disciplines on which financial management relies are

Correct AnswerverifiedShow Answer

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1. The threat of new entrants....
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Common stock is a residual form of owner...
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