Exam 1: Overview of Corporate Finance

When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that areexpected to increase share price.

Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are

High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price.

Market forces and agency costs help to prevent or minimize agency problems.

PC Express is evaluating the purchase of a new machine that will cost $300 000. The company bought the existing machine for $200 000 five years ago and can sell it today for $50 000. What is the marginal cost of buying the new machine?

Economic value added is calculated by subtracting the cost of funds used to finance an investment from its after-tax operating profits.

Which of the following is an investing decision?

Which of the following would be considered an agency cost?

A corporation

The part of finance concerned with the design and delivery of advice and financial products toindividuals, businesses, and government is called

Financial services is concerned with the duties of the financial manager.

Agency costs include all of the following EXCEPT

A company determines its overall cost of capital by

In a corporation, the members of the board of directors are elected by the

All of the following are key strengths of a corporation EXCEPT

The conflict between the goals of a firm's owners and the goals of its nonowner managers is

The officer responsible for the firm's financial activities such as financial planning and fund raising,making capital expenditure decisions, and managing cash, credit, the pension fund, and foreignexchange is

The___________ has/have the ultimate responsibility in guiding corporate affairs and carrying out policies.

When a firm is under-managed,

The primary economic principle used in managerial finance is