Question 1

Which of the following actions should be taken by managers to avoid takeover threats?

Accepted Answer

A) Managers should take action to maximize stock prices. 
B) Managers should declare lower dividends. 
C) Managers should let the stockholders make the capital structure decisions. 
D) Managers should make decisions that decrease the firm's expected future cash flows. 
E) Managers should ensure that high-quality goods and services are sold at the highest possible prices. 
A) Managers should take action to maximize stock prices. 
B) Managers should declare lower dividends. 
C) Managers should let the stockholders make the capital structure decisions. 
D) Managers should make decisions that decrease the firm's expected future cash flows. 
E) Managers should ensure that high-quality goods and services are sold at the highest possible prices.

Question 2

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) construct 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) construct the firm's financial statements

Question 3

Which of the following forms of business offers limited personal liability to owners as well as the choice to be taxed as either a corporation or as a partnership?

Accepted Answer

A) Limited liability partnership 
B) Limited liability company 
C) Corporation 
D) Proprietorship 
E) Partnership 
A) Limited liability partnership 
B) Limited liability company 
C) Corporation 
D) Proprietorship 
E) Partnership

Question 4

In general, the role of a financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Accepted Answer

A) True 
 B)False

Question 5

In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by companies with policies that are more aligned with stockholder interests.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct? Assume everything else equal.

Accepted Answer

A) Riskier assets always have higher market values. 
B) Riskier assets are more valuable than (preferred to) less risky assets. 
C) The sooner cash is received, the more valuable it is. 
D) Investors generally prefer short-term, high-risk assets investments. 
E) Investors generally receive higher returns on investments with low risk than investments with high risk. 
A) Riskier assets always have higher market values. 
B) Riskier assets are more valuable than (preferred to) less risky assets. 
C) The sooner cash is received, the more valuable it is. 
D) Investors generally prefer short-term, high-risk assets investments. 
E) Investors generally receive higher returns on investments with low risk than investments with high risk.

Question 7

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 dividends 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 dividends received by stockholders 
D) maximizing the net income earned by the company 
E) maximizing the managerial compensation (incentives)

Question 8

The primary goal of a financial manager should be to _____.

Accepted Answer

A) minimize operating costs 
B) minimize interest payments 
C) minimize tax payments 
D) maximize operating income each year 
E) maximize the value of the firm's stock 
A) minimize operating costs 
B) minimize interest payments 
C) minimize tax payments 
D) maximize operating income each year 
E) maximize the value of the firm's stock

Question 9

A financial manager's task is to make decisions concerning the acquisition and use of funds for the greatest benefit of the firm.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements concerning the complexity of the manager's task in a multinational corporation is correct?

Accepted Answer

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

Question 11

Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?

Accepted Answer

A) The management personnel of its subsidiaries need to be fluent only in English. 
B) The subsidiaries based in different countries never face any constraints on the transfer of corporate resources. 
C) Cash flows in different subsidiaries are denominated in different currencies. 
D) The terms of trade determined after negotiation with the host government and the multinational corporation are always well aligned to the firm's policies. 
E) All the subsidiaries are based only in countries that have homogeneous cultural heritages. 
A) The management personnel of its subsidiaries need to be fluent only in English. 
B) The subsidiaries based in different countries never face any constraints on the transfer of corporate resources. 
C) Cash flows in different subsidiaries are denominated in different currencies. 
D) The terms of trade determined after negotiation with the host government and the multinational corporation are always well aligned to the firm's policies. 
E) All the subsidiaries are based only in countries that have homogeneous cultural heritages.

Question 12

Which of the following statements is true of corporate bylaws?

Accepted Answer

A) Corporate bylaws are a 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 corporate bylaws. 
C) Procedures that govern changes in corporate bylaws are contained in the corporate charter. 
D) To open their doors and start their operations, corporations are legally required only to file their bylaws with the appropriate agency in the state where they incorporate. 
E) The declaration of the activities that a firm will pursue and the number of directors are included in the corporate bylaws. 
A) Corporate bylaws are a 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 corporate bylaws. 
C) Procedures that govern changes in corporate bylaws are contained in the corporate charter. 
D) To open their doors and start their operations, corporations are legally required only to file their bylaws with the appropriate agency in the state where they incorporate. 
E) The declaration of the activities that a firm will pursue and the number of directors are included in the corporate bylaws.

Question 13

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 14

As hostile takeovers are most likely to occur when a firm's stock is overvalued, the managers have a strong incentive to undervalue the firm's stock relative to its potential.

Accepted Answer

A) True 
 B)False

Question 15

Institutional investors can ensure that a corporation pursues goals that are in their best interest by _____.

Accepted Answer

A) binding the management with stockholder-sponsored proposals 
B) ensuring that the management is working toward maximizing current earnings 
C) compensating managers of the corporation on the basis of the firm's performance in the short run 
D) implementing policies that encourage management to make decisions that maximize managers' wealth 
E) monitoring its financial performance to ensure that managers pursue the goal of wealth maximization 
A) binding the management with stockholder-sponsored proposals 
B) ensuring that the management is working toward maximizing current earnings 
C) compensating managers of the corporation on the basis of the firm's performance in the short run 
D) implementing policies that encourage management to make decisions that maximize managers' wealth 
E) monitoring its financial performance to ensure that managers pursue the goal of wealth maximization

Question 16

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 17

Which of the following statements is correct?

Accepted Answer

A) A hostile takeover is the primary method of transferring ownership interest in a corporation. 
B) The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners and managers, that is, the owners and managers are the corporation. 
C) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. 
D) In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in financial markets than other organizational forms. 
E) Although stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way. 
A) A hostile takeover is the primary method of transferring ownership interest in a corporation. 
B) The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners and managers, that is, the owners and managers are the corporation. 
C) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. 
D) In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in financial markets than other organizational forms. 
E) Although stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way.

Question 18

Identify the internal factor that influences the stock price of a firm.

Accepted Answer

A) Legal constraints 
B) Capital structure 
C) Tax laws 
D) General level of economic activity 
E) Conditions in the stock market 
A) Legal constraints 
B) Capital structure 
C) Tax laws 
D) General level of economic activity 
E) Conditions in the stock market

Question 19

Which of the following is a disadvantage of the corporate form of business?

Accepted Answer

A) A corporation faces difficulty in attracting substantial amounts of funds. 
B) The owners of a corporation are subject to unlimited personal liability for the business' debts. 
C) Setting up a corporation is more complex and time-consuming than setting up a proprietorship or a partnership. 
D) A corporation is said to have limited life. 
E) Ownership interests cannot be transferred as easily as proprietorship or partnership interests. 
A) A corporation faces difficulty in attracting substantial amounts of funds. 
B) The owners of a corporation are subject to unlimited personal liability for the business' debts. 
C) Setting up a corporation is more complex and time-consuming than setting up a proprietorship or a partnership. 
D) A corporation is said to have limited life. 
E) Ownership interests cannot be transferred as easily as proprietorship or partnership interests.

Which of the following actions should be taken by managers to avoid takeover threats?

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

Which of the following forms of business offers limited personal liability to owners as well as the choice to be taxed as either a corporation or as a partnership?

In general, the role of a financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Which of the following statements is correct? Assume everything else equal.

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

The primary goal of a financial manager should be to _____.

A financial manager's task is to make decisions concerning the acquisition and use of funds for the greatest benefit of the firm.

Which of the following statements concerning the complexity of the manager's task in a multinational corporation is correct?

Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?

Which of the following statements is true of corporate bylaws?

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

As hostile takeovers are most likely to occur when a firm's stock is overvalued, the managers have a strong incentive to undervalue the firm's stock relative to its potential.

Institutional investors can ensure that a corporation pursues goals that are in their best interest by _____.

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

Which of the following statements is correct?

Identify the internal factor that influences the stock price of a firm.

Which of the following is a disadvantage of the corporate form of business?

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics 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 actions should be taken by managers to avoid takeover threats?

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

Which of the following forms of business offers limited personal liability to owners as well as the choice to be taxed as either a corporation or as a partnership?

In general, the role of a financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Which of the following statements is correct? Assume everything else equal.

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

The primary goal of a financial manager should be to _____.

A financial manager's task is to make decisions concerning the acquisition and use of funds for the greatest benefit of the firm.

Which of the following statements concerning the complexity of the manager's task in a multinational corporation is correct?

Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?

Which of the following statements is true of corporate bylaws?

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

As hostile takeovers are most likely to occur when a firm's stock is overvalued, the managers have a strong incentive to undervalue the firm's stock relative to its potential.

Institutional investors can ensure that a corporation pursues goals that are in their best interest by _____.

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

Which of the following statements is correct?

Identify the internal factor that influences the stock price of a firm.

Which of the following is a disadvantage of the corporate form of business?

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debt Characteristics 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