Question 1

Included in the primary activities of the financial manager is/are

Accepted Answer

A)  financial analysis and planning. 
B)  making financing decisions. 
C)  making investment decisions. 
D)  all of the above.

Question 2

Among solutions to the agency problem in publicly held corporations are all of the followingEXCEPT

Accepted Answer

A)  bonuses based on short-term results. 
B)  stock options. 
C)  performance shares. 
D)  cash bonuses tied to goal achievement.

Question 3

Which of the following legal forms of organization is most expensive to organize?

Accepted Answer

A)  limited partnerships 
B)  sole proprietorships 
C)  partnerships 
D)  corporations

Question 4

The officer responsible for the firm's accounting activities, such as corporate accounting, taxmanagement, financial accounting, and cost accounting is

Accepted Answer

A)  the controller. 
B)  the treasurer. 
C)  the foreign exchange manager. 
D)  none of the above.

Question 5

Higher risk tends to result in a higher share price since the stockholder must be compensated forthe greater risk.

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

The goal of profit maximization would result in priority for

Accepted Answer

A)  cash flows available to stockholders. 
B)  earnings per share. 
C)  risk of the investment. 
D)  timing of the returns.

Question 8

Return and risk are the key determinants in share price. Increased risk, other things remaining thesame, results in

Accepted Answer

A)  an undetermined share price. 
B)  a lower share price. 
C)  a higher share price. 
D)  an unchanged share price.

Question 9

Sig Hansen runs a ski resort in British Columbia. He is considering replacing the ski lifts at theresort. His calculations suggest that if he does, the economic benefits from the upgraded ski-lift operations will total $959,000 over the next six years. The ski lifts he already has are projected to generate $444,000 in economic benefits over the next six years. The new ski lifts would require an initial cash investment of $385,000 and Sig estimates he can sell his existing ski lift equipment for$170,000. Based on these estimates, what is Sig's marginal benefit from replacing the ski lifts?

Accepted Answer

A)  $345,000 
B)  $574,000 
C)  $515,000 
D)  $959,000

Exam 1: Overview of Corporate Finance