Question 1

Which of the following statements is CORRECT?

Accepted Answer

A) In a typical partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business, and the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
E) A major disadvantage of a partnership relative to a corporation is the fact that federal income taxes must be paid by the partners rather than by the firm itself. 
A) In a typical partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business, and the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
E) A major disadvantage of a partnership relative to a corporation is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

Question 2

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Accepted Answer

A) Maximize managers' own interests, which are by definition consistent with maximizing shareholders' wealth. 
B) Maximize the firm's expected EPS, which must also maximize the firm's price per share. 
C) Minimize the firm's risks because most stockholders dislike risk. In turn, this will maximize the firm's stock price. 
D) Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers. 
E) Since it is impossible to measure a stock's intrinsic value, the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value. 
A) Maximize managers' own interests, which are by definition consistent with maximizing shareholders' wealth. 
B) Maximize the firm's expected EPS, which must also maximize the firm's price per share. 
C) Minimize the firm's risks because most stockholders dislike risk. In turn, this will maximize the firm's stock price. 
D) Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers. 
E) Since it is impossible to measure a stock's intrinsic value, the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value.

Question 3

Managers always attempt to maximize the long-run value of their firms' stocks,or the stocks' intrinsic values.This is exactly what stockholders desire.Thus,conflicts between stockholders and managers are not possible.

Accepted Answer

A) True 
 B)False

Question 4

In order to maximize its shareholders' value,a firm's management must attempt to maximize the stock price in the long run,or the stock's "intrinsic value."

Accepted Answer

A) True 
 B)False

Question 5

Organizing as a corporation makes it easier for the firm to raise capital.This is because corporations' stockholders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests.

Accepted Answer

A) True 
 B)False

Which of the following statements is CORRECT?

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Managers always attempt to maximize the long-run value of their firms' stocks,or the stocks' intrinsic values.This is exactly what stockholders desire.Thus,conflicts between stockholders and managers are not possible.

In order to maximize its shareholders' value,a firm's management must attempt to maximize the stock price in the long run,or the stock's "intrinsic value."

Organizing as a corporation makes it easier for the firm to raise capital.This is because corporations' stockholders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests.

Financial Markets and Institutions

Financial Statements, cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

Mergers and Acquisitions

Continuous Compounding and Discounting

Zero Coupon Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Degree of Leverage

Filters

Exam 1: An Overview of Financial Management

Which of the following statements is CORRECT?

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Managers always attempt to maximize the long-run value of their firms' stocks,or the stocks' intrinsic values.This is exactly what stockholders desire.Thus,conflicts between stockholders and managers are not possible.

In order to maximize its shareholders' value,a firm's management must attempt to maximize the stock price in the long run,or the stock's "intrinsic value."

Organizing as a corporation makes it easier for the firm to raise capital.This is because corporations' stockholders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests.

Financial Markets and Institutions

Financial Statements, cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

Mergers and Acquisitions

Continuous Compounding and Discounting

Zero Coupon Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Degree of Leverage

Filters