Question 1

____ 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 
A)  Investment strategies 
B)  Economic environment factors 
C)  Major policy decisions 
D)  Dividend policies

Question 2

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 creditors 
A)  stockholders and creditors 
B)  management and workers 
C)  stockholders and creditors, and management and workers 
D)  management and creditors

Question 3

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 repayment 
A)  decrease depreciation 
B)  increase capital expenditures 
C)  decrease dividends 
D)  increase debt repayment

Question 4

The managerial decision rule that emerges from the microeconomic profit maximization model is _____.

Accepted Answer

A)  Marginal Costs  Marginal Costs 
D)  Marginal Costs = Marginal Revenue 
A)  Marginal Costs  Marginal Costs 
D)  Marginal Costs = Marginal Revenue

Question 5

In recent years, front-page stories of ethical issues have exploded and focused attention on ethical practices. 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 
A)  collateralized mortgage obligation scandal 
B)  treasury bond trading scandal 
C)  insider stock trading scandal 
D)  economic stimulus package scandal

Question 6

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

Accepted Answer

A)  increase 
B)  decrease 
C)  do not affect 
D)  are not important to 
A)  increase 
B)  decrease 
C)  do not affect 
D)  are not important to

Question 7

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 profits 
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 profits

Question 8

____ arise from the divergent objectives between owners and managers.

Accepted Answer

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

Question 9

There is often a divergence between the shareholder wealth maximization goal and the actual goals pursued by management. The primary reason for this is ____.

Accepted Answer

A)  geographical dispersion of shareholders 
B)  separation of ownership and control 
C)  age differences between managers and shareholders 
D)  that both have their own agendas 
A)  geographical dispersion of shareholders 
B)  separation of ownership and control 
C)  age differences between managers and shareholders 
D)  that both have their own agendas

Question 10

There are problems with using the "profit maximization" criterion. Which of the following is (are) correct? 
I. Profit maximization has an ambiguous definition of "maximizing profits."
II. Profit maximization fails to consider the risks associated with alternative decisions.

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 
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 11

An advantage that the corporate form of business has over either the sole proprietorship or partnership is the _____.

Accepted Answer

A)  ability to raise capital 
B)  ease of changing ownership 
C)  limited liability 
D)  All of these are correct 
A)  ability to raise capital 
B)  ease of changing ownership 
C)  limited liability 
D)  All of these are correct

Question 12

____ provide a direct measure of the success of decisions made by a firm's managers.

Accepted Answer

A)  Profits 
B)  Stock prices 
C)  Sales 
D)  Dividends per share 
A)  Profits 
B)  Stock prices 
C)  Sales 
D)  Dividends per share

Question 13

All of the following are advantages of the corporate form of business organization EXCEPT _____.

Accepted Answer

A)  permanent legal existence 
B)  unlimited liability 
C)  flexibility in ownership change 
D)  ability to raise capital 
A)  permanent legal existence 
B)  unlimited liability 
C)  flexibility in ownership change 
D)  ability to raise capital

Question 14

Which of the following statements is (are) correct? 
I. Shareholders elect the Chairman of the Board.
II. The board of directors has no control over whether dividends will be paid.

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 
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

Corporate officers normally include all the following EXCEPT _____.

Accepted Answer

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

Question 16

Financial managers can take a variety of actions to influence the market value of a company's stock. All of the following are classifications of actions taken EXCEPT _____ decisions.

Accepted Answer

A)  investing 
B)  financing 
C)  dividend 
D)  tax implication 
A)  investing 
B)  financing 
C)  dividend 
D)  tax implication

Question 17

Per the Small Business Administration, what percent of all businesses are considered small businesses?

Accepted Answer

A)  >20% 
B)  >75% 
C)  >95% 
D)  >50% 
A)  >20% 
B)  >75% 
C)  >95% 
D)  >50%

Question 18

The limitations of the profit maximization goal include which of the following?

Accepted Answer

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

Question 19

A major advantage of the corporate form of business over both sole proprietorships and partnerships is the _____.

Accepted Answer

A)  limited liability 
B)  reduction in taxes 
C)  ease of formation 
D)  ability to maintain ownership 
A)  limited liability 
B)  reduction in taxes 
C)  ease of formation 
D)  ability to maintain ownership

Question 20

Agency costs include all of the following, EXCEPT _____.

Accepted Answer

A)  expenditures to monitor management's actions 
B)  providing stock as part of management's compensation expenditures to structure the organization 
C)  flotation costs 
D)  bonding expenditures 
A)  expenditures to monitor management's actions 
B)  providing stock as part of management's compensation expenditures to structure the organization 
C)  flotation costs 
D)  bonding expenditures

Exam 1: The Role and Objective of Financial Management

____ are largely outside of the direct control of managers.

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

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

The managerial decision rule that emerges from the microeconomic profit maximization model is _____.

In recent years, front-page stories of ethical issues have exploded and focused attention on ethical practices. All of the following are a breach of financial ethics EXCEPT _____.

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

All of the following are problems with the microeconomic profit maximization model EXCEPT _____.

____ arise from the divergent objectives between owners and managers.

There is often a divergence between the shareholder wealth maximization goal and the actual goals pursued by management. The primary reason for this is ____.

There are problems with using the "profit maximization" criterion. Which of the following is (are) correct? I. Profit maximization has an ambiguous definition of "maximizing profits." II. Profit maximization fails to consider the risks associated with alternative decisions.

An advantage that the corporate form of business has over either the sole proprietorship or partnership is the _____.

____ provide a direct measure of the success of decisions made by a firm's managers.

All of the following are advantages of the corporate form of business organization EXCEPT _____.

Which of the following statements is (are) correct? I. Shareholders elect the Chairman of the Board. II. The board of directors has no control over whether dividends will be paid.

Corporate officers normally include all the following EXCEPT _____.

Financial managers can take a variety of actions to influence the market value of a company's stock. All of the following are classifications of actions taken EXCEPT _____ decisions.

Per the Small Business Administration, what percent of all businesses are considered small businesses?

The limitations of the profit maximization goal include which of the following?

A major advantage of the corporate form of business over both sole proprietorships and partnerships is the _____.

Agency costs include all of the following, EXCEPT _____.

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Breakeven Analysis

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

Corporate Restructuring

Filters