Deck 1: The Role of Managerial Finance

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Question
The corporate treasurer is the officer responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting.
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Question
Finance can be defined as

A) the system of debits and credits.
B) the science of the production, distribution, and consumption of wealth.
C) the art and science of managing money.
D) the art of merchandising products and services.
Question
Which of the following is a career opportunity in managerial finance?

A) Investment.
B) Real Estate and Insurance.
C) Capital expenditures Management.
D) Personal Financial Planning.
Question
The corporate treasurer's focus tends to be more external, while the controller's focus is more internal.
Question
In large companies, the project finance manager is responsible for coordinating the assets and liabilities of the employees' pension fund.
Question
Financial services are concerned with the duties of the financial manager.
Question
Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government.
Question
The corporate treasurer typically handles the both cost accounting and financial accounting.
Question
The corporate controller is the officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange.
Question
A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships.
Question
Financial managers actively manage the financial affairs of many types of business-financial and non-financial, private and public, for-profit and not-for-profit.
Question
The corporate controller typically handles the accounting activities, such as tax management, data processing, and cost and financial accounting.
Question
Managerial finance

A) involves tasks such as budgeting, financial forecasting, cash management, and funds procurement.
B) involves the design and delivery of advice and financial products.
C) recognizes funds on an accrual basis.
D) devotes the majority of its attention to the collection and presentation of financial data.
Question
The capital expenditures analyst/manager is responsible for the evaluation and recommendation of proposed asset investments and may be involved in the financial aspects of implementation of approved investments.
Question
________ is concerned with the duties of the financial manager in the business firm.

A) Financial Services
B) Financial Manager
C) Managerial Finance
D) None of the above
Question
Career opportunities in financial services include all of the following EXCEPT

A) investments.
B) real estate and insurance.
C) capital expenditures management.
D) personal financial planning.
Question
The financial analyst administers the firm's credit policy by analyzing or managing the evaluation of credit applications, extending credit, and monitoring and collecting accounts receivable.
Question
Managerial finance is concerned with design and delivery of advice and financial products to individuals, business, and government.
Question
Financial service

A) is concerned with the duties of the financial manager.
B) involves the design and delivery of advice and financial products.
C) provides guidelines for the efficient operation of the business.
D) handles accounting activities related to data processing.
Question
The part of finance concerned with design and delivery of advice and financial products to individuals, business, and government is called

A) Managerial Finance.
B) Financial Manager.
C) Financial Services.
D) none of the above.
Question
In partnerships, a partner can readily transfer his/her wealth to other partners.
Question
The sole proprietor has unlimited liability; his or her total investment in the business, but not his or her personal assets, can be taken to satisfy creditors.
Question
The ________ is responsible for evaluating and recommending proposed asset investments.

A) Financial Manager
B) Credit Manager
C) Pension Fund Manager
D) Capital Expenditures Manager
Question
The controller is commonly responsible for

A) managing cash.
B) financial accounting.
C) managing credit activities.
D) financial planning.
Question
In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners.
Question
High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price.
Question
The officer responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting is the

A) treasurer.
B) controller.
C) foreign exchange manager.
D) none of the above.
Question
The treasurer is commonly responsible for

A) taxes.
B) data processing.
C) making capital expenditures.
D) cost accounting.
Question
Which of the following legal forms of organization is characterized by limited liability?

A) Sole proprietorship.
B) Partnership.
C) Corporation.
D) Professional partnership.
Question
A major weakness of a partnership is

A) limited liability.
B) difficulty liquidating or transferring ownership.
C) access to capital markets.
D) low organizational costs.
Question
The officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange is

A) treasurer.
B) controller.
C) foreign exchange manager.
D) none of the above.
Question
Which of the following legal forms of organization is most expensive to organize?

A) Sole proprietorships.
B) Partnerships.
C) Corporations.
D) Limited partnership.
Question
About 75 percent of all business firms are

A) sole proprietorships.
B) partnerships.
C) corporations.
D) S-corporations.
Question
The dominant form of organization with respect to receipts and net profits is the

A) sole proprietorship.
B) partnership.
C) corporation.
D) S-corporation.
Question
Under which of the following legal forms of organization, is ownership readily transferable?

A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.
Question
All of the following are key strengths of a corporation EXCEPT

A) access to capital markets.
B) limited liability.
C) low organization costs.
D) readily transferable ownership.
Question
In limited partnerships, all partners' liabilities are limited to their investment in the partnership.
Question
Which of the following legal forms of organization's income is NOT taxed under individual income tax rate?

A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.
Question
When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.
Question
In a(n) ________, owners have limited liability with regard to the business. They are not personally liable for the malpractice of other owners.

A) limited partnership
B) S-corporation
C) partnership
D) limited liability partnership
Question
When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to maximize shareholder value.
Question
To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return.
Question
A high earnings per share (EPS) does not necessarily translate into a high stock price.
Question
Corporate owner's receive realizable return through

A) earnings per share and cash dividends.
B) increase in share price and cash dividends.
C) increase in share price and earnings per share.
D) profit and earnings per share.
Question
The primary goal of the financial manager is

A) minimizing risk.
B) maximizing profit.
C) maximizing wealth.
D) minimizing return.
Question
Profit maximization fails because it ignores all EXCEPT

A) the timing of returns.
B) earnings per share.
C) cash flows available to stockholders.
D) risk.
Question
The goal of ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice.
Question
Dividend payments change directly with changes in earnings per share.
Question
The wealth of the owners of a corporation is represented by

A) profits.
B) earnings per share.
C) share value.
D) cash flow.
Question
Profit maximization as the goal of the firm is NOT ideal because

A) profits are only accounting measures.
B) cash flows are more representative of financial strength.
C) profit maximization does not consider risk.
D) profits today are less desirable than profits earned in future years.
Question
Stockholders expect to earn higher rates of return on investments of lower risk and lower rates of return on investments of higher risk.
Question
The key variables in the owner wealth maximization process are

A) earnings per share and risk.
B) cash flows and risk.
C) earnings per share and share price.
D) profits and risk.
Question
The goal of profit maximization would result in priority for

A) cash flows available to stockholders.
B) risk of the investment.
C) earnings per share.
D) timing of the returns.
Question
Cash flow and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.

A) a lower share price
B) a higher share price
C) an unchanged share price
D) an undetermined share price
Question
Profit maximization as a goal is not ideal because it does NOT directly consider

A) risk and cash flow.
B) cash flow and stock price.
C) risk and EPS.
D) EPS and stock price.
Question
Risk and the magnitude and timing of cash flows are the key determinants of share price, which represents the wealth of the owners in the firm.
Question
The profit maximization goal ignores the timing of returns, does not directly consider cash flows, and ignores risk.
Question
An increase in firm risk tends to result in a higher share price since the stockholder must be compensated for the greater risk.
Question
Wealth maximization as the goal of the firm implies enhancing the wealth of

A) the Board of Directors.
B) the firm's employees.
C) the federal government.
D) the firm's stockholders.
Question
The wealth of corporate owners is measured by the share price of the stock.
Question
A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would <strong>A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would  </strong> A) choose Asset 1. B) choose Asset 2. C) choose Asset 3. D) be indifferent between Asset 1 and Asset 2. <div style=padding-top: 35px>

A) choose Asset 1.
B) choose Asset 2.
C) choose Asset 3.
D) be indifferent between Asset 1 and Asset 2.
Question
The financial manager places primary emphasis on cash flows, the inflow and outflow of cash.
Question
Corporate ethics policies typically apply to ________ in dealing with ________.

A) employee actions; customers and creditors
B) employee actions; customers, vendors, and regulators
C) management actions; all corporate constituents
D) employee actions; all corporate constituents
Question
An ethics program is expected to have a ________ impact on the firm's share price.

A) positive
B) negative
C) no impact
D) undetermined
Question
The financial manager prepares financial statements that recognize revenue at the point of sale and expenses when incurred.
Question
Cash flow and risk are the key determinants in share price. Increased risk, other things remaining the same, results in

A) a lower share price.
B) a higher share price.
C) an unchanged share price.
D) an undetermined share price.
Question
Financial managers evaluating decision alternatives or potential actions must consider

A) only risk.
B) only return.
C) both risk and return.
D) risk, return, and the impact on share price.
Question
Using certain standardized and generally accepted principles, the accountant prepares financial statements that recognize revenue at the point of sale and expenses when incurred.
Question
The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.
Question
All of the following as considered stakeholders EXCEPT

A) consumers.
B) suppliers.
C) employees.
D) competitors.
Question
A more recent issue that is causing major problems in the business community is

A) the privatization of ownership.
B) short-term versus long-term financial goals of management.
C) ethical problems.
D) environmental concerns.
Question
An effective ethics program can have all of the following positive benefits, EXCEPT

A) reduce potential litigation and judgment costs.
B) maintain a positive corporate image and build shareholder confidence.
C) gain the loyalty, commitment, and respect of the firm's stakeholders.
D) making sure violations are penalized, while at the same time not subjecting the employee to publicity.
Question
An effective ethics program can

A) weakened corporate value.
B) had no effect on a corporation's value
C) enhance a corporation's value.
D) be thought of as unimportant to corporate owners.
Question
Higher cash flow and greater risk

A) have no effect on share price.
B) have an inverse effect on share price.
C) adversely affect share price.
D) have the same effect on share price.
Question
A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. <strong>A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.   Based on the profit maximization goal, the financial manager would choose</strong> A) Asset 1. B) Asset 2. C) Asset 3. D) Asset 4. <div style=padding-top: 35px> Based on the profit maximization goal, the financial manager would choose

A) Asset 1.
B) Asset 2.
C) Asset 3.
D) Asset 4.
Question
If Steve Jobs, the CEO of Apple, were to pass away, what do you think would happen to price of Apple's stock?

A) It would decrease because of the perceived increased risk because of lack of near-term leadership.
B) It would increase because of the perceived increased risk because of lack of near-term leadership.
C) It would decrease because of the perceived decreased risk because of lack of near-term leadership.
D) It would increase because of the perceived decreased risk because of lack of near-term leadership.
Question
The accountant evaluates financial statements, develops additional data, and makes decisions based on his or her assessment of the associated returns and risks.
Question
The implementation of a pro-active ethics program is expected to result in

A) a positive corporate image and increased respect, but is not expected to affect cash flows.
B) an increased share price resulting from a decrease in risk, but is not expected to affect cash flows.
C) a positive corporate image and increased respect, but is not expected to affect share price.
D) a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow resulting in an increase in share price.
Question
Marginal cost-benefit analysis states that financial decisions should be made and actions taken only when added benefits exceed added costs.
Question
As the risk of a stock investment increases, investors'

A) return will increase.
B) return will decrease.
C) required rate of return will decrease.
D) required rate of return will increase.
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Deck 1: The Role of Managerial Finance
1
The corporate treasurer is the officer responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting.
False
2
Finance can be defined as

A) the system of debits and credits.
B) the science of the production, distribution, and consumption of wealth.
C) the art and science of managing money.
D) the art of merchandising products and services.
the art and science of managing money.
3
Which of the following is a career opportunity in managerial finance?

A) Investment.
B) Real Estate and Insurance.
C) Capital expenditures Management.
D) Personal Financial Planning.
Capital expenditures Management.
4
The corporate treasurer's focus tends to be more external, while the controller's focus is more internal.
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k this deck
5
In large companies, the project finance manager is responsible for coordinating the assets and liabilities of the employees' pension fund.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
6
Financial services are concerned with the duties of the financial manager.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
7
Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
8
The corporate treasurer typically handles the both cost accounting and financial accounting.
Unlock Deck
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Unlock Deck
k this deck
9
The corporate controller is the officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
10
A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
11
Financial managers actively manage the financial affairs of many types of business-financial and non-financial, private and public, for-profit and not-for-profit.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
12
The corporate controller typically handles the accounting activities, such as tax management, data processing, and cost and financial accounting.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
13
Managerial finance

A) involves tasks such as budgeting, financial forecasting, cash management, and funds procurement.
B) involves the design and delivery of advice and financial products.
C) recognizes funds on an accrual basis.
D) devotes the majority of its attention to the collection and presentation of financial data.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
14
The capital expenditures analyst/manager is responsible for the evaluation and recommendation of proposed asset investments and may be involved in the financial aspects of implementation of approved investments.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
15
________ is concerned with the duties of the financial manager in the business firm.

A) Financial Services
B) Financial Manager
C) Managerial Finance
D) None of the above
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
16
Career opportunities in financial services include all of the following EXCEPT

A) investments.
B) real estate and insurance.
C) capital expenditures management.
D) personal financial planning.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
17
The financial analyst administers the firm's credit policy by analyzing or managing the evaluation of credit applications, extending credit, and monitoring and collecting accounts receivable.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
18
Managerial finance is concerned with design and delivery of advice and financial products to individuals, business, and government.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
19
Financial service

A) is concerned with the duties of the financial manager.
B) involves the design and delivery of advice and financial products.
C) provides guidelines for the efficient operation of the business.
D) handles accounting activities related to data processing.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
20
The part of finance concerned with design and delivery of advice and financial products to individuals, business, and government is called

A) Managerial Finance.
B) Financial Manager.
C) Financial Services.
D) none of the above.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
21
In partnerships, a partner can readily transfer his/her wealth to other partners.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
22
The sole proprietor has unlimited liability; his or her total investment in the business, but not his or her personal assets, can be taken to satisfy creditors.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
23
The ________ is responsible for evaluating and recommending proposed asset investments.

A) Financial Manager
B) Credit Manager
C) Pension Fund Manager
D) Capital Expenditures Manager
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
24
The controller is commonly responsible for

A) managing cash.
B) financial accounting.
C) managing credit activities.
D) financial planning.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
25
In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
26
High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
27
The officer responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting is the

A) treasurer.
B) controller.
C) foreign exchange manager.
D) none of the above.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
28
The treasurer is commonly responsible for

A) taxes.
B) data processing.
C) making capital expenditures.
D) cost accounting.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
29
Which of the following legal forms of organization is characterized by limited liability?

A) Sole proprietorship.
B) Partnership.
C) Corporation.
D) Professional partnership.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
30
A major weakness of a partnership is

A) limited liability.
B) difficulty liquidating or transferring ownership.
C) access to capital markets.
D) low organizational costs.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
31
The officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange is

A) treasurer.
B) controller.
C) foreign exchange manager.
D) none of the above.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
32
Which of the following legal forms of organization is most expensive to organize?

A) Sole proprietorships.
B) Partnerships.
C) Corporations.
D) Limited partnership.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
33
About 75 percent of all business firms are

A) sole proprietorships.
B) partnerships.
C) corporations.
D) S-corporations.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
34
The dominant form of organization with respect to receipts and net profits is the

A) sole proprietorship.
B) partnership.
C) corporation.
D) S-corporation.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
35
Under which of the following legal forms of organization, is ownership readily transferable?

A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
36
All of the following are key strengths of a corporation EXCEPT

A) access to capital markets.
B) limited liability.
C) low organization costs.
D) readily transferable ownership.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
37
In limited partnerships, all partners' liabilities are limited to their investment in the partnership.
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Unlock Deck
k this deck
38
Which of the following legal forms of organization's income is NOT taxed under individual income tax rate?

A) Sole proprietorships.
B) Partnerships.
C) Limited partnership.
D) Corporation.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
39
When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
40
In a(n) ________, owners have limited liability with regard to the business. They are not personally liable for the malpractice of other owners.

A) limited partnership
B) S-corporation
C) partnership
D) limited liability partnership
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
41
When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to maximize shareholder value.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
42
To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
43
A high earnings per share (EPS) does not necessarily translate into a high stock price.
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Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
44
Corporate owner's receive realizable return through

A) earnings per share and cash dividends.
B) increase in share price and cash dividends.
C) increase in share price and earnings per share.
D) profit and earnings per share.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
45
The primary goal of the financial manager is

A) minimizing risk.
B) maximizing profit.
C) maximizing wealth.
D) minimizing return.
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Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
46
Profit maximization fails because it ignores all EXCEPT

A) the timing of returns.
B) earnings per share.
C) cash flows available to stockholders.
D) risk.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
47
The goal of ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
48
Dividend payments change directly with changes in earnings per share.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
49
The wealth of the owners of a corporation is represented by

A) profits.
B) earnings per share.
C) share value.
D) cash flow.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
50
Profit maximization as the goal of the firm is NOT ideal because

A) profits are only accounting measures.
B) cash flows are more representative of financial strength.
C) profit maximization does not consider risk.
D) profits today are less desirable than profits earned in future years.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
51
Stockholders expect to earn higher rates of return on investments of lower risk and lower rates of return on investments of higher risk.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
52
The key variables in the owner wealth maximization process are

A) earnings per share and risk.
B) cash flows and risk.
C) earnings per share and share price.
D) profits and risk.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
53
The goal of profit maximization would result in priority for

A) cash flows available to stockholders.
B) risk of the investment.
C) earnings per share.
D) timing of the returns.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
54
Cash flow and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.

A) a lower share price
B) a higher share price
C) an unchanged share price
D) an undetermined share price
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
55
Profit maximization as a goal is not ideal because it does NOT directly consider

A) risk and cash flow.
B) cash flow and stock price.
C) risk and EPS.
D) EPS and stock price.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
56
Risk and the magnitude and timing of cash flows are the key determinants of share price, which represents the wealth of the owners in the firm.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
57
The profit maximization goal ignores the timing of returns, does not directly consider cash flows, and ignores risk.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
58
An increase in firm risk tends to result in a higher share price since the stockholder must be compensated for the greater risk.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
k this deck
59
Wealth maximization as the goal of the firm implies enhancing the wealth of

A) the Board of Directors.
B) the firm's employees.
C) the federal government.
D) the firm's stockholders.
Unlock Deck
Unlock for access to all 133 flashcards in this deck.
Unlock Deck
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60
The wealth of corporate owners is measured by the share price of the stock.
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61
A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would <strong>A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would  </strong> A) choose Asset 1. B) choose Asset 2. C) choose Asset 3. D) be indifferent between Asset 1 and Asset 2.

A) choose Asset 1.
B) choose Asset 2.
C) choose Asset 3.
D) be indifferent between Asset 1 and Asset 2.
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62
The financial manager places primary emphasis on cash flows, the inflow and outflow of cash.
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63
Corporate ethics policies typically apply to ________ in dealing with ________.

A) employee actions; customers and creditors
B) employee actions; customers, vendors, and regulators
C) management actions; all corporate constituents
D) employee actions; all corporate constituents
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64
An ethics program is expected to have a ________ impact on the firm's share price.

A) positive
B) negative
C) no impact
D) undetermined
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65
The financial manager prepares financial statements that recognize revenue at the point of sale and expenses when incurred.
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66
Cash flow and risk are the key determinants in share price. Increased risk, other things remaining the same, results in

A) a lower share price.
B) a higher share price.
C) an unchanged share price.
D) an undetermined share price.
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67
Financial managers evaluating decision alternatives or potential actions must consider

A) only risk.
B) only return.
C) both risk and return.
D) risk, return, and the impact on share price.
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68
Using certain standardized and generally accepted principles, the accountant prepares financial statements that recognize revenue at the point of sale and expenses when incurred.
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69
The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.
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70
All of the following as considered stakeholders EXCEPT

A) consumers.
B) suppliers.
C) employees.
D) competitors.
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71
A more recent issue that is causing major problems in the business community is

A) the privatization of ownership.
B) short-term versus long-term financial goals of management.
C) ethical problems.
D) environmental concerns.
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72
An effective ethics program can have all of the following positive benefits, EXCEPT

A) reduce potential litigation and judgment costs.
B) maintain a positive corporate image and build shareholder confidence.
C) gain the loyalty, commitment, and respect of the firm's stakeholders.
D) making sure violations are penalized, while at the same time not subjecting the employee to publicity.
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73
An effective ethics program can

A) weakened corporate value.
B) had no effect on a corporation's value
C) enhance a corporation's value.
D) be thought of as unimportant to corporate owners.
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74
Higher cash flow and greater risk

A) have no effect on share price.
B) have an inverse effect on share price.
C) adversely affect share price.
D) have the same effect on share price.
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75
A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. <strong>A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.   Based on the profit maximization goal, the financial manager would choose</strong> A) Asset 1. B) Asset 2. C) Asset 3. D) Asset 4. Based on the profit maximization goal, the financial manager would choose

A) Asset 1.
B) Asset 2.
C) Asset 3.
D) Asset 4.
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76
If Steve Jobs, the CEO of Apple, were to pass away, what do you think would happen to price of Apple's stock?

A) It would decrease because of the perceived increased risk because of lack of near-term leadership.
B) It would increase because of the perceived increased risk because of lack of near-term leadership.
C) It would decrease because of the perceived decreased risk because of lack of near-term leadership.
D) It would increase because of the perceived decreased risk because of lack of near-term leadership.
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77
The accountant evaluates financial statements, develops additional data, and makes decisions based on his or her assessment of the associated returns and risks.
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78
The implementation of a pro-active ethics program is expected to result in

A) a positive corporate image and increased respect, but is not expected to affect cash flows.
B) an increased share price resulting from a decrease in risk, but is not expected to affect cash flows.
C) a positive corporate image and increased respect, but is not expected to affect share price.
D) a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow resulting in an increase in share price.
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79
Marginal cost-benefit analysis states that financial decisions should be made and actions taken only when added benefits exceed added costs.
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80
As the risk of a stock investment increases, investors'

A) return will increase.
B) return will decrease.
C) required rate of return will decrease.
D) required rate of return will increase.
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Unlock Deck
Unlock for access to all 133 flashcards in this deck.