Question 1

What are the characteristics of a corporation?

Accepted Answer

A corporation is characterized by

Question 2

The TSX Composite Index is representative of equity market value of the top listed Canadian companies.

Accepted Answer

A) True 
 B)False

Question 3

Because socially desirable goals can impede profitability in many instances, managers should not try to operate under the assumption of wealth maximization.

Accepted Answer

A) True 
 B)False

Question 4

As finance emerged as an analytical, decision oriented discipline, the initial emphasis was placed on capital acquisitions.

Accepted Answer

A) True 
 B)False

Question 5

What 2 choices does the board of directors have to distribute earnings of a corporation?

Accepted Answer

Earnings generated by the corporation ar

Question 6

A corporation must have at least 35 shareholders.

Accepted Answer

A) True 
 B)False

Question 7

Businesses will increasingly rely on B2B Internet applications to speed up cash flows.

Accepted Answer

A) True 
 B)False

Question 8

According to agency theory, other than maximizing shareholder wealth what other self-interests do financial managers have?

Accepted Answer

Financial managers are interested in:
•

Question 9

The increasing percentage ownership of public corporations by institutional investors has:

Accepted Answer

A)  had no effect on corporate management. 
B)  created higher returns for the stock market in general. 
C)  created more pressure on public companies to manage their firms more efficiently. 
D)  taken away the voice of the individual investor. 
A)  had no effect on corporate management. 
B)  created higher returns for the stock market in general. 
C)  created more pressure on public companies to manage their firms more efficiently. 
D)  taken away the voice of the individual investor.

Question 10

Profits of a manufacturing corporation are taxed at the same rate as dividends.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not an example of restructuring as discussed in the text?

Accepted Answer

A)  Repurchase of common stock 
B)  Creating a new organizational chart 
C)  Merging with companies in related industries 
D)  Divesting of an unprofitable division 
A)  Repurchase of common stock 
B)  Creating a new organizational chart 
C)  Merging with companies in related industries 
D)  Divesting of an unprofitable division

Question 12

Which of the following is not a major area of concern and emphasis in modern financial management and in this text?

Accepted Answer

A)  Marginal analysis 
B)  Risk-return trade-off 
C)  Commodity trading 
D)  Changing financial institutions 
A)  Marginal analysis 
B)  Risk-return trade-off 
C)  Commodity trading 
D)  Changing financial institutions

Question 13

Maximization of shareholder wealth is a concept in which:

Accepted Answer

A)  increased earnings are of primary importance. 
B)  increased cash flows are of primary importance. 
C)  increased dividends are of primary importance. 
D)  increased share price is of primary importance. 
A)  increased earnings are of primary importance. 
B)  increased cash flows are of primary importance. 
C)  increased dividends are of primary importance. 
D)  increased share price is of primary importance.

Question 14

The financial markets allocate capital to corporations by:

Accepted Answer

A)  reflecting expectations of the market participants in the corporation's share price. 
B)  requiring higher returns from companies with lower risk than their competitors. 
C)  rewarding companies with expected high returns with lower relative stock prices. 
D)  relying on the opinion of investment dealers. 
A)  reflecting expectations of the market participants in the corporation's share price. 
B)  requiring higher returns from companies with lower risk than their competitors. 
C)  rewarding companies with expected high returns with lower relative stock prices. 
D)  relying on the opinion of investment dealers.

Question 15

Financial markets allocate capital based on:

Accepted Answer

A)  the pricing mechanism. 
B)  the efforts of financial intermediaries. 
C)  intervention by the Bank of Canada. 
D)  the number of treasury bills outstanding. 
A)  the pricing mechanism. 
B)  the efforts of financial intermediaries. 
C)  intervention by the Bank of Canada. 
D)  the number of treasury bills outstanding.

Question 16

Setting a goal of profit maximization has all of the following drawbacks except:

Accepted Answer

A)  investors understand that generally, more profit is better 
B)  Risk may increase as profit changes 
C)  Profit fails to take into account the timing of benefits 
D)  Accurately measuring profit is almost impossible 
A)  investors understand that generally, more profit is better 
B)  Risk may increase as profit changes 
C)  Profit fails to take into account the timing of benefits 
D)  Accurately measuring profit is almost impossible

Question 17

The Internet is largely responsible for the internationalization of the financial markets.

Accepted Answer

A) True 
 B)False

Question 18

What 4 factors will investors consider in the analysis of a firm market share value?

Accepted Answer

• The risk inherent in the firm (nature

Question 19

A financial manager's goal of maximizing current or short-term earnings may not be appropriate because:

Accepted Answer

A)  it considers the timing of the benefits. 
B)  increased earnings may be accompanied by acceptably higher levels of risk. 
C)  share ownership is widely dispersed. 
D)  earnings are subjective; they can be defined in various ways such as accounting or economic earnings. 
A)  it considers the timing of the benefits. 
B)  increased earnings may be accompanied by acceptably higher levels of risk. 
C)  share ownership is widely dispersed. 
D)  earnings are subjective; they can be defined in various ways such as accounting or economic earnings.

Question 20

When a corporation uses the financial markets to raise new funds, the sale of securities is made in the:

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  on-line market. 
D)  third market. 
A)  primary market. 
B)  secondary market. 
C)  on-line market. 
D)  third market.

Exam 1: The Goals and Functions of Financial Management

What are the characteristics of a corporation?

The TSX Composite Index is representative of equity market value of the top listed Canadian companies.

Because socially desirable goals can impede profitability in many instances, managers should not try to operate under the assumption of wealth maximization.

As finance emerged as an analytical, decision oriented discipline, the initial emphasis was placed on capital acquisitions.

What 2 choices does the board of directors have to distribute earnings of a corporation?

A corporation must have at least 35 shareholders.

Businesses will increasingly rely on B2B Internet applications to speed up cash flows.

According to agency theory, other than maximizing shareholder wealth what other self-interests do financial managers have?

The increasing percentage ownership of public corporations by institutional investors has:

Profits of a manufacturing corporation are taxed at the same rate as dividends.

Which of the following is not an example of restructuring as discussed in the text?

Which of the following is not a major area of concern and emphasis in modern financial management and in this text?

Maximization of shareholder wealth is a concept in which:

The financial markets allocate capital to corporations by:

Financial markets allocate capital based on:

Setting a goal of profit maximization has all of the following drawbacks except:

The Internet is largely responsible for the internationalization of the financial markets.

What 4 factors will investors consider in the analysis of a firm market share value?

A financial manager's goal of maximizing current or short-term earnings may not be appropriate because:

When a corporation uses the financial markets to raise new funds, the sale of securities is made in the:

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

Filters