Question 1

Which of the following functions deals with the management of money?

Accepted Answer

A)  Marketing 
B)  Investment 
C)  Financial services 
D)  Information systems 
E)  Managerial finance 
A)  Marketing 
B)  Investment 
C)  Financial services 
D)  Information systems 
E)  Managerial finance

Question 2

Paying Payroll Service (PPS) recently declared bankruptcy. The price of PPS's stock has dropped from approximately $10 per share one year ago to $1 today. You can imagine that stockholders are not happy that the value of their stock has dropped so significantly. At the same time, the financial position of the firm was deteriorating, PPS executives increased their salaries and perquisites substantially. Nothing they did violated any laws or was considered an unethical act. We would most likely describe this situation as _____.

Accepted Answer

A)  an agency problem 
B)  an accounting glitch 
C)  an appropriate use of the tax laws 
D)  an appropriate action, because executive compensation should always be increased substantially each year 
E)  acceptable, because it is obvious that the executives were trying to maximize the value of the firm, which is what the shareholders want them to do 
A)  an agency problem 
B)  an accounting glitch 
C)  an appropriate use of the tax laws 
D)  an appropriate action, because executive compensation should always be increased substantially each year 
E)  acceptable, because it is obvious that the executives were trying to maximize the value of the firm, which is what the shareholders want them to do

Question 3

Incentive compensation plans are used to attract and retain top managerial talent as well as to align the interests of management with shareholders.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is true of the terms under which companies compete?

Accepted Answer

A)  The governments of subsidiary countries establish the terms of competition and trade on various transactions. 
B)  The terms under which companies compete is determined by the fluctuations in the exchange rate of the currencies of subsidiary countries. 
C)  The terms under which companies compete is determined by direct negotiation between the host government and the multinational corporation. 
D)  The ability to curtail unprofitable operations determines the terms under which companies compete. 
E)  The terms under which companies compete in a competitive marketplace are established by the host government. 
A)  The governments of subsidiary countries establish the terms of competition and trade on various transactions. 
B)  The terms under which companies compete is determined by the fluctuations in the exchange rate of the currencies of subsidiary countries. 
C)  The terms under which companies compete is determined by direct negotiation between the host government and the multinational corporation. 
D)  The ability to curtail unprofitable operations determines the terms under which companies compete. 
E)  The terms under which companies compete in a competitive marketplace are established by the host government.

Question 5

The management's primary goal is stockholder wealth maximization, which, translates into _____.

Accepted Answer

A)  maximizing the value of the firm as measured by the price of its common stock 
B)  maximizing the earnings per share of the stockholders 
C)  maximizing the dividend received by stockholders 
D)  maximizing the net income earned by the company 
E)  maximizing the managerial compensation (incentives) 
A)  maximizing the value of the firm as measured by the price of its common stock 
B)  maximizing the earnings per share of the stockholders 
C)  maximizing the dividend received by stockholders 
D)  maximizing the net income earned by the company 
E)  maximizing the managerial compensation (incentives)

Question 6

The investment function of finance _____.

Accepted Answer

A)  takes decision regarding the cash flow of the investment corporation 
B)  determines the expenses incurred on ensuring the socially acceptable behavior of the investment corporation 
C)  determines the values, risks, and returns associated with such financial assets 
D)  is required to ensure that 50 percent of investments are in environment-friendly corporations 
E)  ensures that the corporations payout maximum dividends per share 
A)  takes decision regarding the cash flow of the investment corporation 
B)  determines the expenses incurred on ensuring the socially acceptable behavior of the investment corporation 
C)  determines the values, risks, and returns associated with such financial assets 
D)  is required to ensure that 50 percent of investments are in environment-friendly corporations 
E)  ensures that the corporations payout maximum dividends per share

Question 7

Financial services refer to functions provided by organizations that _____.

Accepted Answer

A)  deal with the most efficient management of the human resources 
B)  ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations 
C)  recommend the most environment friendly method of operations to a corporation 
D)  deal with achieving maximum earning per share for the shareholders 
E)  deal with the management of money 
A)  deal with the most efficient management of the human resources 
B)  ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations 
C)  recommend the most environment friendly method of operations to a corporation 
D)  deal with achieving maximum earning per share for the shareholders 
E)  deal with the management of money

Question 8

Which of the following statements is true of a hostile takeover?

Accepted Answer

A)  A hostile takeover results when a management wants the firm to be taken over. 
B)  A hostile takeover occurs when a firm's stock is undervalued relative to its potential. 
C)  A hostile takeover retains the managers of the acquired firm at their previous positions. 
D)  A hostile takeover refrains managers to take actions that maximize stock prices. 
E)  A hostile takeover results in poor management and inefficient operations. 
A)  A hostile takeover results when a management wants the firm to be taken over. 
B)  A hostile takeover occurs when a firm's stock is undervalued relative to its potential. 
C)  A hostile takeover retains the managers of the acquired firm at their previous positions. 
D)  A hostile takeover refrains managers to take actions that maximize stock prices. 
E)  A hostile takeover results in poor management and inefficient operations.

Question 9

The success of financial institutions requires an understanding of _____.

Accepted Answer

A)  regulations regarding the maximization of wealth applicable to the corporations 
B)  regulations that affect these financial institutions 
C)  the environment-friendly manufacturing methods adopted by various corporations 
D)  the socially responsible behavior required to be demonstrated by these institutions 
E)  their accountability in reporting the financial information for a publicly traded company 
A)  regulations regarding the maximization of wealth applicable to the corporations 
B)  regulations that affect these financial institutions 
C)  the environment-friendly manufacturing methods adopted by various corporations 
D)  the socially responsible behavior required to be demonstrated by these institutions 
E)  their accountability in reporting the financial information for a publicly traded company

Question 10

Which of the following is true of corporations that operate in several different countries?

Accepted Answer

A)  A nation may expropriate the assets of multinational corporations without compensation. 
B)  Differences in legal systems of host nations make it easy for executives trained in one country to operate effectively in another. 
C)  Cash flows in various parts of a multinational corporate system are denominated in one currency. 
D)  Multinational corporations have the advantage of uniform attitudes toward risk taking from one country to the next. 
E)  Uniformity of tax-laws across different nations result in proper coordination and control of subsidiaries. 
A)  A nation may expropriate the assets of multinational corporations without compensation. 
B)  Differences in legal systems of host nations make it easy for executives trained in one country to operate effectively in another. 
C)  Cash flows in various parts of a multinational corporate system are denominated in one currency. 
D)  Multinational corporations have the advantage of uniform attitudes toward risk taking from one country to the next. 
E)  Uniformity of tax-laws across different nations result in proper coordination and control of subsidiaries.

Question 11

Which of the following statements is true of the concentrated organizational structures of non-U.S. firms?

Accepted Answer

A)  The concentrated organizational structures of non-U.S. firms permit managers to focus more on short-term earnings. 
B)  The concentrated organizational structures of non-U.S. firms result in easier access to credit in times of financial difficulty. 
C)  The concentrated organizational structures of non-U.S. firms make it difficult to change managers. 
D)  The concentrated organizational structures of non-U.S. firms reduce the managerial focus on wealth maximization. 
E)  The concentrated organizational structures of non-U.S. firms result from the universal banking relationships that exist outside the United States. 
A)  The concentrated organizational structures of non-U.S. firms permit managers to focus more on short-term earnings. 
B)  The concentrated organizational structures of non-U.S. firms result in easier access to credit in times of financial difficulty. 
C)  The concentrated organizational structures of non-U.S. firms make it difficult to change managers. 
D)  The concentrated organizational structures of non-U.S. firms reduce the managerial focus on wealth maximization. 
E)  The concentrated organizational structures of non-U.S. firms result from the universal banking relationships that exist outside the United States.

Question 12

All else equal, in which of the following forms of business would the possibility of an agency problem be the greatest?

Accepted Answer

A)  A U.S. corporation in which individual stockholders own extremely small proportions of the company. 
B)  A proprietorship in which the owner is actively managing the business operations. 
C)  A partnership in which all the partners share management and decision-making responsibilities equally. 
D)  A foreign corporation with concentrated ownership that is, relatively few owners. 
E)  A U.S. corporation that gives company shares as incentives to its managers. 
A)  A U.S. corporation in which individual stockholders own extremely small proportions of the company. 
B)  A proprietorship in which the owner is actively managing the business operations. 
C)  A partnership in which all the partners share management and decision-making responsibilities equally. 
D)  A foreign corporation with concentrated ownership that is, relatively few owners. 
E)  A U.S. corporation that gives company shares as incentives to its managers.

Question 13

Identify a true statement about the financial services provided by organizations.

Accepted Answer

A)  Financial services organizations invest only in environmentally responsible public corporations. 
B)  Financial services include services provided by banks and insurance companies only. 
C)  Financial services organizations make investment decisions based solely on the socially responsible behavior of corporates. 
D)  Financial services organizations provide comparative cash flow positions of competing corporations to investors to help them with investment decisions. 
E)  Financial services organizations help individuals and companies determine how to invest money to achieve their financial goals. 
A)  Financial services organizations invest only in environmentally responsible public corporations. 
B)  Financial services include services provided by banks and insurance companies only. 
C)  Financial services organizations make investment decisions based solely on the socially responsible behavior of corporates. 
D)  Financial services organizations provide comparative cash flow positions of competing corporations to investors to help them with investment decisions. 
E)  Financial services organizations help individuals and companies determine how to invest money to achieve their financial goals.

Question 14

The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to _____.

Accepted Answer

A)  keep confidential the procedures used to construct and report financial statements. 
B)  certify financial reports that are submitted to the Securities and Exchange Commission. 
C)  pursue interests that result in large gains for them and large losses for stockholders 
D)  oversee the corporation's audit and attest the audit report 
E)  render an unbiased (independent) opinion concerning the firm's financial statements 
A)  keep confidential the procedures used to construct and report financial statements. 
B)  certify financial reports that are submitted to the Securities and Exchange Commission. 
C)  pursue interests that result in large gains for them and large losses for stockholders 
D)  oversee the corporation's audit and attest the audit report 
E)  render an unbiased (independent) opinion concerning the firm's financial statements

Question 15

Which of the following statements is true of agency problems?

Accepted Answer

A)  Regardless of economic conditions, if a firm's stock price falls during the year, this indicates that the firm's managers must not be acting in the best interests of the shareholders. 
B)  One method of controlling agency problems is to engage in the taking of "poison pills." 
C)  One of the best means to control agency problems is to require the managers and other important decision makers of the firm to also be owners of the firm. 
D)  Agency problems probably would not exist if the important decisions of a firm were made by persons who have no vested interests, such as ownership, in the firm. 
E)  Shareholders solve the agency problems by hostile takeover of the firm from the managers. 
A)  Regardless of economic conditions, if a firm's stock price falls during the year, this indicates that the firm's managers must not be acting in the best interests of the shareholders. 
B)  One method of controlling agency problems is to engage in the taking of "poison pills." 
C)  One of the best means to control agency problems is to require the managers and other important decision makers of the firm to also be owners of the firm. 
D)  Agency problems probably would not exist if the important decisions of a firm were made by persons who have no vested interests, such as ownership, in the firm. 
E)  Shareholders solve the agency problems by hostile takeover of the firm from the managers.

Question 16

Which of the following statements is correct?

Accepted Answer

A)  The corporate bylaws are the set of rules drawn up by the state to enable managers to run the firm in accordance with state laws. 
B)  Procedures for electing corporate directors are contained in bylaws. 
C)  Procedures that govern changes in the bylaws of the corporation are contained in the corporate charter. 
D)  Although most companies design a charter, only the bylaws are legally required to be filed with the secretary of state in order for a corporation to be in official existence. 
E)  The declaration of the activities that the firm will pursue and the number of directors are included in the corporate charter. 
A)  The corporate bylaws are the set of rules drawn up by the state to enable managers to run the firm in accordance with state laws. 
B)  Procedures for electing corporate directors are contained in bylaws. 
C)  Procedures that govern changes in the bylaws of the corporation are contained in the corporate charter. 
D)  Although most companies design a charter, only the bylaws are legally required to be filed with the secretary of state in order for a corporation to be in official existence. 
E)  The declaration of the activities that the firm will pursue and the number of directors are included in the corporate charter.

Question 17

Which of the following statements increases the complexity of the manager's task in a multinational corporation?

Accepted Answer

A)  The currency values of different countries in which a firm operate experience fluctuations. 
B)  Cash flows in various parts of a multinational corporate system are often denominated in the same currencies. 
C)  All the countries in which a firm operates have uniform political and economic institutions. 
D)  The management personnel of a firm in different countries are fluent in English and several other languages. 
E)  No nation can place constraints on the transfer of corporate resources. 
A)  The currency values of different countries in which a firm operate experience fluctuations. 
B)  Cash flows in various parts of a multinational corporate system are often denominated in the same currencies. 
C)  All the countries in which a firm operates have uniform political and economic institutions. 
D)  The management personnel of a firm in different countries are fluent in English and several other languages. 
E)  No nation can place constraints on the transfer of corporate resources.

Question 18

The financial manager must execute his or her duties independent of the cash flow activities of the firm in order to properly maximize the value of the firm.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about the corporate form of business organization is correct?

Accepted Answer

A)  A corporation has the legal authority to act like a person when conducting business. 
B)  In the United States, corporations generate a lower percentage of total annual sales than either partnerships or proprietorships. 
C)  Corporations generally are smaller than either partnerships or proprietorships. 
D)  One of the most important features of the corporate form of business organization is that stockholders have unlimited liability. 
E)  Corporations can operate under different degrees of formality, ranging from informal, oral understandings to formal agreements filed with the secretary of the state in which the corporations does business. 
A)  A corporation has the legal authority to act like a person when conducting business. 
B)  In the United States, corporations generate a lower percentage of total annual sales than either partnerships or proprietorships. 
C)  Corporations generally are smaller than either partnerships or proprietorships. 
D)  One of the most important features of the corporate form of business organization is that stockholders have unlimited liability. 
E)  Corporations can operate under different degrees of formality, ranging from informal, oral understandings to formal agreements filed with the secretary of the state in which the corporations does business.

Question 20

It is possible to limit the liability faced by some of the partners in a business by establishing a(n) _____.

Accepted Answer

A)  limited liability partnership (LLP) 
B)  general partnership 
C)  sole proprietorship 
D)  S Corporation 
E)  limited liability company (LL
C)  
A)  limited liability partnership (LLP) 
B)  general partnership 
C)  sole proprietorship 
D)  S Corporation 
E)  limited liability company (LL
C)

Which of the following functions deals with the management of money?

Incentive compensation plans are used to attract and retain top managerial talent as well as to align the interests of management with shareholders.

Which of the following statements is true of the terms under which companies compete?

The management's primary goal is stockholder wealth maximization, which, translates into _____.

The investment function of finance _____.

Financial services refer to functions provided by organizations that _____.

Which of the following statements is true of a hostile takeover?

The success of financial institutions requires an understanding of _____.

Which of the following is true of corporations that operate in several different countries?

Which of the following statements is true of the concentrated organizational structures of non-U.S. firms?

All else equal, in which of the following forms of business would the possibility of an agency problem be the greatest?

Identify a true statement about the financial services provided by organizations.

The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to _____.

Which of the following statements is true of agency problems?

Which of the following statements is correct?

Which of the following statements increases the complexity of the manager's task in a multinational corporation?

The financial manager must execute his or her duties independent of the cash flow activities of the firm in order to properly maximize the value of the firm.

Which of the following statements about the corporate form of business organization is correct?

It is possible to limit the liability faced by some of the partners in a business by establishing a(n) _____.

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters

Exam 1: An Overview of Managerial Finance

Which of the following functions deals with the management of money?

Incentive compensation plans are used to attract and retain top managerial talent as well as to align the interests of management with shareholders.

Which of the following statements is true of the terms under which companies compete?

The management's primary goal is stockholder wealth maximization, which, translates into _____.

The investment function of finance _____.

Financial services refer to functions provided by organizations that _____.

Which of the following statements is true of a hostile takeover?

The success of financial institutions requires an understanding of _____.

Which of the following is true of corporations that operate in several different countries?

Which of the following statements is true of the concentrated organizational structures of non-U.S. firms?

All else equal, in which of the following forms of business would the possibility of an agency problem be the greatest?

Identify a true statement about the financial services provided by organizations.

The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to _____.

Which of the following statements is true of agency problems?

Which of the following statements is correct?

Which of the following statements increases the complexity of the manager's task in a multinational corporation?

The financial manager must execute his or her duties independent of the cash flow activities of the firm in order to properly maximize the value of the firm.

Which of the following statements about the corporate form of business organization is correct?

It is possible to limit the liability faced by some of the partners in a business by establishing a(n) _____.

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters