Exam 1: Getting Started-Principles of Finance

Ultimate control in a corporation is vested in the board of directors.

Which of the following best describes the goal of the firm?

Consider the following equally likely project outcomes: Profit X Y Pessimistic prediction $ 0 $500 Expected outcome $ 500 $500 Optimistic prediction $1000 $500

The term stockholder is equivalent to

Profit maximization is not an adequate goal of the firm when making financial decisions because

In measuring value, the focus should be on

Why do you think many companies compensate executives with options based on long-term increases in the value of the company's stock?

The life of a corporation is not dependent upon the status of the investors.

The major sources of financing for corporations are

Which of the following factors is most important in investment decisions?

The owners of a corporation are liable for the corporation's obligations up to the amount of their investment.

General partners have unrestricted transferability of ownership, while limited partners must have the consent of all partners to transfer their ownership.

The goal of the firm should be the maximization of profit.

Serious ethical violations by corporations such as Enron led to the passage of

In effiicient markets, price rapidly adjust to new information.

In a limited partnership, at least one general partner must remain in the association; the privilege of limited liability still applies to this partner.

Only a few financial decisions involve some sort of risk-return tradeoff.

Rewarding executives for increasing quarterly earnings will motivate them to act in the long-term best interests of shareholders.

Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?

Which of the following statements best represents what finance is about?