Question 1

____ 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 D

Question 2

All of the following economic environment factors affect stock prices except:

Accepted Answer

A)  investment strategies 
B)  competition 
C)  tax rates 
D)  currency exchange rates 
A)  investment strategies 
B)  competition 
C)  tax rates 
D)  currency exchange rates A

Question 3

Examples of agency costs incurred by shareholders to minimize agency problems are:

Accepted Answer

A)  Expenditures associated with independent auditing. 
B)  Expenditures associated with SEC approval. 
C)  Expenditures associated with monitoring management's actions 
D)  Expenditures associated with inventory control. 
A)  Expenditures associated with independent auditing. 
B)  Expenditures associated with SEC approval. 
C)  Expenditures associated with monitoring management's actions 
D)  Expenditures associated with inventory control. C

Question 4

The net present value of an investment made by a firm represents the contribution of that investment to the ____ of the firm.

Accepted Answer

A)  book value 
B)  profit 
C)  value 
D)  cash flow 
A)  book value 
B)  profit 
C)  value 
D)  cash flow

Question 5

Financial management draws heavily on the following related disciplines:

Accepted Answer

A)  accounting 
B)  macroeconomics 
C)  microeconomics 
D)  all of the above 
A)  accounting 
B)  macroeconomics 
C)  microeconomics 
D)  all of the above

Question 6

The managerial decision 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 7

The ____ the risk of receiving future cash flows, the ____ will be the present value of those cash flows.

Accepted Answer

A)  greater, greater 
B)  greater, lower 
C)  lower, lower 
D)  lower, greater 
A)  greater, greater 
B)  greater, lower 
C)  lower, lower 
D)  lower, greater

Question 8

Although this type of business generates less than 6% of the total U.S. business revenue, ____ make up approximately 75% of all businesses.

Accepted Answer

A)  general partnerships 
B)  corporations 
C)  limited partnerships 
D)  sole-proprietorships 
A)  general partnerships 
B)  corporations 
C)  limited partnerships 
D)  sole-proprietorships

Question 9

An economic principle used in finance is:

Accepted Answer

A)  Full utilization of data processing 
B)  Marginal analysis where marginal costs are set equal to marginal revenues. 
C)  Accrual basis of recognizing revenues and expenses 
D)  Target capital structure 
A)  Full utilization of data processing 
B)  Marginal analysis where marginal costs are set equal to marginal revenues. 
C)  Accrual basis of recognizing revenues and expenses 
D)  Target capital structure

Question 10

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 or not dividends will be paid.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 11

The ____ has a goal of serving as a bridge between academic study of finance and the application of financial principles by financial managers.

Accepted Answer

A)  Financial Executives Institute 
B)  Financial Management Association 
C)  American Finance Association 
D)  Institution of Financial Analysts 
A)  Financial Executives Institute 
B)  Financial Management Association 
C)  American Finance Association 
D)  Institution of Financial Analysts

Question 12

According to 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 13

A corporation that operates ethically will notice certain benefits as it applies to shareholder wealth maximization. With shareholder wealth maximization in mind, all of the following could be experienced by an ethical corporation EXCEPT:

Accepted Answer

A)  The corporation can expect to have reduced litigation expense. 
B)  The cooperation can expect to have greater agency costs. 
C)  The corporation can expect to have reduced damages expenses. 
D)  The corporation can expect to have a more favorable impression by customers and investors. 
A)  The corporation can expect to have reduced litigation expense. 
B)  The cooperation can expect to have greater agency costs. 
C)  The corporation can expect to have reduced damages expenses. 
D)  The corporation can expect to have a more favorable impression by customers and investors.

Question 14

The success of a firm is linked to its stakeholders. This group includes:

Accepted Answer

A)  community neighbors 
B)  suppliers 
C)  employees 
D)  all the above 
A)  community neighbors 
B)  suppliers 
C)  employees 
D)  all the above

Question 15

A potential agency conflict can arise between stockholders and creditors because owners may

Accepted Answer

A)  increase the risk of a firm's investments 
B)  decrease the amount of debt outstanding 
C)  decrease the risk of a firm's investments 
D)  increase the firm's net worth 
A)  increase the risk of a firm's investments 
B)  decrease the amount of debt outstanding 
C)  decrease the risk of a firm's investments 
D)  increase the firm's net worth

Question 16

As a result of accounting scandals, several methods have been developed to deal with the issues of corporate governance. They are all of the following EXCEPT:

Accepted Answer

A)  The Board must select only SEC approved consultants. 
B)  Chairman of the Board position should be split from the CEO position. 
C)  Board of Directors should have a majority of independent directors. 
D)  The Board of Directors must explain its approach for adopting a code of ethics for the CEO and senior financial officers. 
A)  The Board must select only SEC approved consultants. 
B)  Chairman of the Board position should be split from the CEO position. 
C)  Board of Directors should have a majority of independent directors. 
D)  The Board of Directors must explain its approach for adopting a code of ethics for the CEO and senior financial officers.

Question 17

What is the advantage of an LLC over an LLP business form?

Accepted Answer

An LLC (or limited liability company) ha

Question 18

Accounting-based measures of performance include all the following except

Accepted Answer

A)  return on equity 
B)  cash flow 
C)  return on assets 
D)  market share 
A)  return on equity 
B)  cash flow 
C)  return on assets 
D)  market share

Question 19

Shareholder wealth is measured by the ____ of the shareholders' common stock holdings.

Accepted Answer

A)  Book value 
B)  Market value 
C)  Historic value 
D)  Compound value 
A)  Book value 
B)  Market value 
C)  Historic value 
D)  Compound value

Question 20

Corporate securities represent claims against the

Accepted Answer

A)  corporate officers of the firm 
B)  agents of the corporation 
C)  liabilities and net worth of the firm 
D)  assets and future earnings of the firm 
A)  corporate officers of the firm 
B)  agents of the corporation 
C)  liabilities and net worth of the firm 
D)  assets and future earnings of the firm

Exam 1: The Role and Objective of Financial Management

____ arise from the divergent objectives between owners and managers.

All of the following economic environment factors affect stock prices except:

Examples of agency costs incurred by shareholders to minimize agency problems are:

The net present value of an investment made by a firm represents the contribution of that investment to the ____ of the firm.

Financial management draws heavily on the following related disciplines:

The managerial decision that emerges from the microeconomic profit maximization model is:

The ____ the risk of receiving future cash flows, the ____ will be the present value of those cash flows.

Although this type of business generates less than 6% of the total U.S. business revenue, ____ make up approximately 75% of all businesses.

An economic principle used in finance is:

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 or not dividends will be paid.

The ____ has a goal of serving as a bridge between academic study of finance and the application of financial principles by financial managers.

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

A corporation that operates ethically will notice certain benefits as it applies to shareholder wealth maximization. With shareholder wealth maximization in mind, all of the following could be experienced by an ethical corporation EXCEPT:

The success of a firm is linked to its stakeholders. This group includes:

A potential agency conflict can arise between stockholders and creditors because owners may

As a result of accounting scandals, several methods have been developed to deal with the issues of corporate governance. They are all of the following EXCEPT:

What is the advantage of an LLC over an LLP business form?

Accounting-based measures of performance include all the following except

Shareholder wealth is measured by the ____ of the shareholders' common stock holdings.

Corporate securities represent claims against the

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-term Financing

The Management of Cash and Marketable Securities

Management of Accounts Receivable and Inventories

Lease and Intermediate-term Financing

Financing With Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Continuous Compounding and Discounting

Mutually Exclusive Investments Having Unequal Lives

Breakeven Analysis

Bond Refunding Analysis

Taxes

Filters

The the risk of receiving future cash flows, the will be the present value of those cash flows.