Exam 1: Why Value Value

Which of the following were fundamental flaws in the decisions made by participants in the securitized mortgage market that contributed to its boom through 2007? I.Leverage creates value. II.Lower costs create value. III.Diversification creates value. IV.Lower cost of capital creates value.

Which of the following was most responsible for the Internet boom and bust?

The faster companies can increase their revenues and deploy more capital at attractive rates of return,the more value they create.

Explain the challenge competition plays in creating value in the long run and what this means for the firm that wishes to create value in the long run.

Which of the following have been found to occur in companies that adopt long-term value-creation policies? I.Higher customer satisfaction. II.Higher number of acquisitions. III.Better treatment of former employees. IV.A higher level of corporate responsibility.

Data from Europe and the United States found that the correlation between value creation and employment in the company has been:

The conservation of value corollary of the value-creation principle says that:

Under which condition will a fast-growing firm create value?

Which one of the following actions would help a company create long-term value?

Relative to its ability to create value,managers tend to neglect changing capital structure.

The empirical evidence shows that the link between the value created by the acquisition of another company and earnings per share (EPS):

Aggressive use of leverage is the theme that links most major financial crises.

Paying attention to which of the following tends to lead to a company doing well in the stock market? I.Growth. II.Price-to-earnings ratio. III.Earnings per share. IV.Return on invested capital.