Question 1

Among the most important agency relationships in the context of finance is (are) the relationship(s) between .

Accepted Answer

A) stockholders and creditors 
B) management and workers 
C) stockholders and creditors, and management and workers 
D) management and creditors 
A) stockholders and creditors 
B) management and workers 
C) stockholders and creditors, and management and workers 
D) management and creditors

Question 2

What is the advantage of an LLC over an LLP business form?

Accepted Answer

An LLC (or limited liability company) ha

Question 3

Techniques identified by John Casey that managers could keep in mind when addressing the ethical dimensions of a business problem include all of the following except:

Accepted Answer

A) collect all the facts bearing on the problem 
B) clarify the parameters of the problem 
C) involve all parties with a financial interest in the outcome 
D) seek equity for those who may be affected 
A) collect all the facts bearing on the problem 
B) clarify the parameters of the problem 
C) involve all parties with a financial interest in the outcome 
D) seek equity for those who may be affected

Question 4

The existence of divergent objectives between owners and managers is one example of a class of problems arising from ____.

Accepted Answer

A) social responsibility concerns 
B) age differences between managers and owners 
C) agency relationships 
D) union-management relations 
A) social responsibility concerns 
B) age differences between managers and owners 
C) agency relationships 
D) union-management relations

Question 5

A major advantage of the corporate form of business over both sole proprietorships and partnerships is the

Accepted Answer

A) limited liability 
B) reduction in taxes 
C) ease of formation 
D) ability to maintain ownership 
A) limited liability 
B) reduction in taxes 
C) ease of formation 
D) ability to maintain ownership

Question 6

In a limited partnership, the limited partners may limit their:

Accepted Answer

A) tax liability 
B) liability 
C) tax write-off 
D) ability to attract new products 
A) tax liability 
B) liability 
C) tax write-off 
D) ability to attract new products

Question 7

There are three major factors that determine the market value of a company's share of stock.All of the following
Are factors EXCEPT:

Accepted Answer

A) Cash flows 
B) Sales generated 
C) Timing of cash flows 
D) Risk taken to generate cash flows 
A) Cash flows 
B) Sales generated 
C) Timing of cash flows 
D) Risk taken to generate cash flows

Question 8

According to the shareholder wealth maximization goal, management should seek to maximize the of the to_______owners.

Accepted Answer

A) present value;expected pretax cash flows 
B) future value;expected pretax cash flows 
C) present value;expected future returns 
D) future value;expected future returns 
A) present value;expected pretax cash flows 
B) future value;expected pretax cash flows 
C) present value;expected future returns 
D) future value;expected future returns

Question 9

are important because the financial health of a firm depends on the firm being able to generate sufficient cash to pay its creditors, employees, suppliers, and owners.

Accepted Answer

A) cash sales 
B) cash flows 
C) cash profits 
D) net profits 
A) cash sales 
B) cash flows 
C) cash profits 
D) net profits

Question 10

All of the following are advantages of the corporate form of business organization EXCEPT:

Accepted Answer

A) unlimited life 
B) unlimited liability 
C) flexibility in ownership change 
D) ability to raise capital 
A) unlimited life 
B) unlimited liability 
C) flexibility in ownership change 
D) ability to raise capital

Question 11

Examples of agency costs incurred by shareholders to minimize agency problems are:

Accepted Answer

A) Expenditures associated with independent auditing. 
B) Expenditures associated with SEC approval. 
C) Expenditures associated with monitoring management's actions 
D) Expenditures associated with inventory control. 
A) Expenditures associated with independent auditing. 
B) Expenditures associated with SEC approval. 
C) Expenditures associated with monitoring management's actions 
D) Expenditures associated with inventory control.

Question 12

Preferred stock is considered priority stock.Explain this priority.

Accepted Answer

Common stock is a residual form of owner

Question 13

All of the following are problems with the microeconomic profit maximization model except:

Accepted Answer

A) the absence of a time dimension 
B) offers financial managers insights to a wide range of problems 
C) does not consider the risk of alternative decisions 
D) the problem of defining profits 
A) the absence of a time dimension 
B) offers financial managers insights to a wide range of problems 
C) does not consider the risk of alternative decisions 
D) the problem of defining profits

Question 14

A corporation that operates ethically will notice certain benefits as it applies to shareholder wealth maximization.With shareholder wealth maximization in mind, all of the following could be experienced by an ethical corporation EXCEPT:

Accepted Answer

A) The corporation can expect to have reduced litigation expense. 
B) The cooperation can expect to have greater agency costs. 
C) The corporation can expect to have reduced damages expenses. 
D) The corporation can expect to have a more favorable impression by customers and investors. 
A) The corporation can expect to have reduced litigation expense. 
B) The cooperation can expect to have greater agency costs. 
C) The corporation can expect to have reduced damages expenses. 
D) The corporation can expect to have a more favorable impression by customers and investors.

Question 15

provide a direct measure of the success of decisions made by a firm's managers.

Accepted Answer

A) profits 
B) stock prices 
C) sales 
D) dividends per share 
A) profits 
B) stock prices 
C) sales 
D) dividends per share

Question 16

The success of a firm is linked to its stakeholders.This group includes:

Accepted Answer

A) community neighbors 
B) suppliers 
C) employees 
D) all of these 
A) community neighbors 
B) suppliers 
C) employees 
D) all of these

Question 17

Accounting is concerned primarily with matching:

Accepted Answer

A) cost-based revenue and expenses 
B) tax liability and future cash flows 
C) revenue and long term debt 
D) inventory and cost of sales 
A) cost-based revenue and expenses 
B) tax liability and future cash flows 
C) revenue and long term debt 
D) inventory and cost of sales

Question 18

There are five competitive forces that influence an industry's structure.

Accepted Answer

1.The threat of new entrants.

Question 19

deals with economic decisions of individuals, households, and firms.

Accepted Answer

A) Economic accounting 
B) Microeconomics 
C) Blue Chip econometrics 
D) Macroeconomics 
A) Economic accounting 
B) Microeconomics 
C) Blue Chip econometrics 
D) Macroeconomics

Question 20

The difference between a firm's annual after-tax operating profit and its total annual cost of capital is known as:

Accepted Answer

A) earned income 
B) Economic Value Added 
C) Managerial Value Added 
D) operating income 
A) earned income 
B) Economic Value Added 
C) Managerial Value Added 
D) operating income

Exam 1: The Role and Objective of Financial Management

Among the most important agency relationships in the context of finance is (are) the relationship(s) between .

What is the advantage of an LLC over an LLP business form?

Techniques identified by John Casey that managers could keep in mind when addressing the ethical dimensions of a business problem include all of the following except:

The existence of divergent objectives between owners and managers is one example of a class of problems arising from ____.

A major advantage of the corporate form of business over both sole proprietorships and partnerships is the

In a limited partnership, the limited partners may limit their:

There are three major factors that determine the market value of a company's share of stock.All of the following Are factors EXCEPT:

According to the shareholder wealth maximization goal, management should seek to maximize the of the to_______owners.

are important because the financial health of a firm depends on the firm being able to generate sufficient cash to pay its creditors, employees, suppliers, and owners.

All of the following are advantages of the corporate form of business organization EXCEPT:

Examples of agency costs incurred by shareholders to minimize agency problems are:

Preferred stock is considered priority stock.Explain this priority.

All of the following are problems with the microeconomic profit maximization model except:

A corporation that operates ethically will notice certain benefits as it applies to shareholder wealth maximization.With shareholder wealth maximization in mind, all of the following could be experienced by an ethical corporation EXCEPT:

provide a direct measure of the success of decisions made by a firm's managers.

The success of a firm is linked to its stakeholders.This group includes:

Accounting is concerned primarily with matching:

There are five competitive forces that influence an industry's structure.

deals with economic decisions of individuals, households, and firms.

The difference between a firm's annual after-tax operating profit and its total annual cost of capital is known as:

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

A: The Time Value of Money

Fixed-Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

A: Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital, Capital Structure, and Dividend Policy

Capital Structure Concepts

Capital Structure Management in Practice

A: Capital Structure Management in Practice

Dividend Policy

Working Capital Management

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate-Term Financing

Financing with Derivatives

A: Financing with Derivatives

Risk Management

International Financial Management

Corporate Restructuring

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