Exam 1: An Introduction to the Foundations of Financial Management

Assume that an investor is offered a choice of a risk-free government bond that is expected to return 3.5% or a high-risk corporate stock.According to one of the principles of finance,what would induce the investor to purchase the corporate stock?

When evaluating an investment project,which of the following best describes the financial information needed by the decision maker?

Consider the after-tax cash flows for Project S and Project L: A rational person would prefer ________.

The opportunity cost of any choice you make is the highest-valued alternative that you had to give up when you made the choice.

Company A reports sales of $100,000 and net income of $15,000.Company B reports sales of $100,000 and net income of $10,000.Therefore,

The root cause of agency problems is conflicts of interest.

Which of the following are characteristics of a limited partnership?

An efficient market is one where the prices of the assets traded in that market fully reflect all available information at any instant in time.

In terms of the costs to organize each,which of the following sequences is correct,moving from highest to lowest cost?

Which of the following is the most important goal that a corporation should strive for?

When making financial decisions,managers should always look at marginal,or incremental cash flows.

One of the causes of the recent financial crisis in the United States has been excessive risk taking due to underestimation of risk.How does this relate to financial leverage? Can overestimation of risk also be detrimental?

In order to reduce agency problems,managers may be provided compensation that includes:

A corporate treasurer is typically responsible for cash management,credit management,and raising capital.

A corporate treasurer is typically responsible for each of the following duties except:

Joe,a risk-averse investor,is trying to choose between investment A and investment B.If investment A is riskier than investment B and Joe selects investment A anyway,then

All of the following contributed to recent financial crises except:

The recent financial crises was exacerbated by

Which of the following is an advantage of the general partnership form of business organization?

Limited partnerships are not as prevalent as corporations because