Question 1

What are the two major decisions made by a financial manager?

Accepted Answer

Financial management can be broken down into (1)the investment,or capital budgeting decision,and (2)the financing decision.The firm has to decide on how much to invest and which real assets to invest in,and secondly,how to raise the necessary cash.

Question 2

Ethical decision making in business can be viewed as a long-term investment in reputation.

Accepted Answer

A) True 
 B)False  True

Question 3

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

Accepted Answer

Ethical decision making can have an important impact on employee attitudes,investor actions,and customer retention.Further,all of these factors can have a large impact on the bottom line.The list of potential benefits for a firm that has developed a reputation for ethical operations can be long-easier employee recruitment,lower employee turnover,easier issue of primary securities,repeat business,good word of mouth,et cetera.In other words,the actions of all stakeholders can be positively affected when they perceive the firm to be ethical in its decisions.

Question 4

What specific arrangements can be used to ensure management is working towards shareholders' goals?

Accepted Answer

Compensation Plans,board of di

Question 5

The primary goal of any company should be to maximize current period profit.

Accepted Answer

A) True 
 B)False

Question 6

The agency problem is mitigated in practice through several devices.

Accepted Answer

A) True 
 B)False

Question 7

Unlimited liability is faced by the owners of:

Accepted Answer

A)  corporations. 
B)  partnerships and corporations. 
C)  sole proprietorships and partnerships. 
D)  all forms of business organization. 
A)  corporations. 
B)  partnerships and corporations. 
C)  sole proprietorships and partnerships. 
D)  all forms of business organization.

Question 8

A corporation is considered to be closely held when:

Accepted Answer

A)  only a few shareholders exist. 
B)  the market value of the shares is stable. 
C)  it operates in a small geographic area. 
D)  management also serves as the board of directors. 
A)  only a few shareholders exist. 
B)  the market value of the shares is stable. 
C)  it operates in a small geographic area. 
D)  management also serves as the board of directors.

Question 9

Describe agency problems in general,and offer at least three examples from corporations.

Accepted Answer

Whenever the firm's managers are differe

Question 10

What are the two critical decisions that have to be made by the financial manager?

Accepted Answer

A)  investment and financing. 
B)  short term and long term. 
C)  debt and equity. 
D)  All of the choices are correct. 
A)  investment and financing. 
B)  short term and long term. 
C)  debt and equity. 
D)  All of the choices are correct.

Question 11

A chief financial officer would typically:

Accepted Answer

A)  report to the treasurer, but supervise the controller. 
B)  report to the controller, but supervise the treasurer. 
C)  report to both the treasurer and controller. 
D)  supervise both the treasurer and controller. 
A)  report to the treasurer, but supervise the controller. 
B)  report to the controller, but supervise the treasurer. 
C)  report to both the treasurer and controller. 
D)  supervise both the treasurer and controller.

Question 12

What does "real asset" mean? What is a "financial asset"?

Accepted Answer

Real assets include all assets used in t

Question 13

A managerial objective to increase market share is more likely to be successful in the long run if the firm is:

Accepted Answer

A)  selling shares in the secondary market. 
B)  the low-cost producer in the industry. 
C)  managed by the board of directors. 
D)  investing in capital budgeting projects. 
A)  selling shares in the secondary market. 
B)  the low-cost producer in the industry. 
C)  managed by the board of directors. 
D)  investing in capital budgeting projects.

Question 14

Provide examples of managerial goals other than the maximization of market value.

Accepted Answer

Managers may attempt to maximize profits

Question 15

Within the realm of ethical decision making,managers should attempt to maximize:

Accepted Answer

A)  the market value of the shareholders' wealth. 
B)  their compensation plans. 
C)  their firm's market share. 
D)  the profits of the firm. 
A)  the market value of the shareholders' wealth. 
B)  their compensation plans. 
C)  their firm's market share. 
D)  the profits of the firm.

Question 16

Which of the following appears to be the most appropriate goal for corporate management?

Accepted Answer

A)  maximizing market value of the company's shares. 
B)  maximizing the company's market share. 
C)  maximizing the current profits of the company. 
D)  minimizing the company's liabilities. 
A)  maximizing market value of the company's shares. 
B)  maximizing the company's market share. 
C)  maximizing the current profits of the company. 
D)  minimizing the company's liabilities.

Question 17

General partners have limited personal liability for business debts in a limited partnership.

Accepted Answer

A) True 
 B)False

Question 18

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

Accepted Answer

A)  the managers are not motivated by personal gain. 
B)  the board of directors may claim the credit. 
C)  short-term, not long-term, profits become the focus. 
D)  investors desire stable profits. 
A)  the managers are not motivated by personal gain. 
B)  the board of directors may claim the credit. 
C)  short-term, not long-term, profits become the focus. 
D)  investors desire stable profits.

Question 19

By organizing itself as a corporation,a business may be able to attract:

Accepted Answer

A)  investors. 
B)  partners. 
C)  proprietors. 
D)  agents. 
A)  investors. 
B)  partners. 
C)  proprietors. 
D)  agents.

Question 20

Which of the following would correctly differentiate general partners from limited partners in a limited partnership?

Accepted Answer

A)  general partners have more job experience. 
B)  general partners have an ownership interest. 
C)  general partners are subject to double taxation. 
D)  general partners have unlimited personal liability. 
A)  general partners have more job experience. 
B)  general partners have an ownership interest. 
C)  general partners are subject to double taxation. 
D)  general partners have unlimited personal liability.

Exam 1: Goals and Governance of the Firm

What are the two major decisions made by a financial manager?

Ethical decision making in business can be viewed as a long-term investment in reputation.

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

What specific arrangements can be used to ensure management is working towards shareholders' goals?

The primary goal of any company should be to maximize current period profit.

The agency problem is mitigated in practice through several devices.

Unlimited liability is faced by the owners of:

A corporation is considered to be closely held when:

Describe agency problems in general,and offer at least three examples from corporations.

What are the two critical decisions that have to be made by the financial manager?

A chief financial officer would typically:

What does "real asset" mean? What is a "financial asset"?

A managerial objective to increase market share is more likely to be successful in the long run if the firm is:

Provide examples of managerial goals other than the maximization of market value.

Within the realm of ethical decision making,managers should attempt to maximize:

Which of the following appears to be the most appropriate goal for corporate management?

General partners have limited personal liability for business debts in a limited partnership.

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

By organizing itself as a corporation,a business may be able to attract:

Which of the following would correctly differentiate general partners from limited partners in a limited partnership?

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters