Question 1

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 wealth maximization goal,the financial manager would choose ________.

Accepted Answer

A)   Asset 1
B)   Asset 2
C)   Asset 3
D)   Asset 4E) A) and B)
F) B) and D)

Question 2

A major weakness of a partnership is ________.

Accepted Answer

A)   the difficulty in maintaining owners' control
B)   the difficulty in liquidating or transferring ownership
C)   the double taxation of income
D)   its high organizational costsE) All of the above
F) C) and D)

Question 3

Which of the following activities of a finance manager determines how the firm raises money to pay for the assets in which it invests?

Accepted Answer

A)   financial analysis and planning
B)   investment decisions
C)   financing decisions
D)   analyzing and planning cash flowsE) A) and B)
F) All of the above

Question 4

In partnerships,partners can readily transfer their wealth to other partners.

Accepted Answer

A) True 
 B)False

Question 5

The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer.

Accepted Answer

A) True 
 B)False

Question 6

The true owner(s) of the corporation is (are) the ________.

Accepted Answer

A)   board of directors
B)   chief executive officer
C)   stockholders
D)   creditorsE) A) and B)
F) A) and C)

Question 7

Economic theories that a financial manager must ensure for efficient business operations,include ________.

Accepted Answer

A)   supply-and-demand analysis
B)   asset pricing theory
C)   Porter's theory of five forces
D)   Monte-Carlo simulationE) C) and D)
F) A) and D)

Question 8

Incentive plans usually tie management compensation to ________.

Accepted Answer

A)   share price
B)   dividends
C)   coupon payments
D)   inventory turnoverE) A) and C)
F) B) and C)

Question 9

Which of the following is the best measure to ensure that management decisions are in the best interest of the stockholders?

Accepted Answer

A)   fire managers who are inefficient
B)   remove management's perquisites
C)   tie management compensation to the performance of the company's common stock price
D)   tie management compensation to the level of dividend per shareE) B) and D)
F) None of the above

Question 10

The board of directors is typically responsible for ________.

Accepted Answer

A)   approving strategic goals and plans
B)   managing day-to-day operations
C)   arranging finance for approved long-term investments
D)   maintaining and controlling the firm's daily cash balancesE) A) and C)
F) A) and D)

Question 11

A sole proprietor has unlimited liability; his or her total investment in a business,but not his or her personal assets,can be taken to satisfy creditors.

Accepted Answer

A) True 
 B)False

Question 12

While making financing decisions,a financial manager should ________.

Accepted Answer

A)   determine the appropriate mix of short-term and long-term financing
B)   decide on which individual securities to select for investment
C)   analyze quarterly budget and performance reports
D)   improve the productivity of manufacturing productsE) A) and B)
F) A) and C)

Question 13

Cash flows and risk are the key determinants in share price.Increased cash flow results in ________,other things remaining the same.

Accepted Answer

A)   a lower share price
B)   a higher share price
C)   an unchanged share price
D)   an undetermined share priceE) All of the above
F) A) and B)

Question 14

Which of the following is an example of agency cost?

Accepted Answer

A)   costs incurred for setting up an agency
B)   failure of making the best investment decision
C)   payment of income tax
D)   payment of interestE) All of the above
F) B) and D)

Question 15

________ is one of the primary responsibilities of a financial manager.

Accepted Answer

A)   Monitoring quarterly tax payments
B)   Analyzing budget and performance reports
C)   Determining the audit policy
D)   Preparing income statementsE) A) and B)
F) B) and D)

Question 16

In a corporation,the board of directors are elected by the ________.

Accepted Answer

A)   chief executive officer
B)   creditors
C)   stockholders
D)   employeesE) A) and D)
F) C) and D)

Question 17

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500.Although the firm paid in full for the merchandise during the year,it is yet to collect at year end from the customer.The possible problem this firm may face is ________.

Accepted Answer

A)   high taxes
B)   lack of cash flow
C)   inability to receive credit
D)   high leverageE) None of the above
F) B) and C)

Question 18

Which of the following is true of cash flows and risk?

Accepted Answer

A)   Low cash flow and low risk result in an increase in share price.
B)   High cash flow and low risk result in an increase in share price.
C)   High cash flow and high risk result in an increase in share price.
D)   Lo cash flow and high risk result in an increase in share price.E) B) and D)
F) All of the above

Question 19

Under which of the following legal forms of organization is ownership readily transferable?

Accepted Answer

A)   sole proprietorships
B)   partnerships
C)   limited partnerships
D)   corporationsE) A) and C)
F) A) and D)

Question 20

The conflict between the goals of a firm's owners and the goals of its non-owner managers is ________.

Accepted Answer

A)   the agency problem
B)   incompatibility
C)   serious only when profits decline
D)   the window-dressingE) None of the above
F) A) and C)

Exam 1: The Role of Managerial Finance

Which of the following is the best measure to ensure that management decisions are in the best interest of the stockholders?

Correct Answer
verified

The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer.

Correct Answer
verified

A sole proprietor has unlimited liability; his or her total investment in a business,but not his or her personal assets,can be taken to satisfy creditors.

Correct Answer
verified

Which of the following activities of a finance manager determines how the firm raises money to pay for the assets in which it invests?

Correct Answer
verified

The board of directors is typically responsible for ________.

Correct Answer
verified

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 wealth maximization goal,the financial manager would choose ________.

Correct Answer
verified

Incentive plans usually tie management compensation to ________.

Correct Answer
verified

The true owner(s) of the corporation is (are) the ________.

Correct Answer
verified

A major weakness of a partnership is ________.

Correct Answer
verified

Cash flows and risk are the key determinants in share price.Increased cash flow results in ________,other things remaining the same.

Correct Answer
verified

Correct Answer
verified

While making financing decisions,a financial manager should ________.

Correct Answer
verified

In partnerships,partners can readily transfer their wealth to other partners.

Correct Answer
verified

Which of the following is an example of agency cost?

Correct Answer
verified

________ is one of the primary responsibilities of a financial manager.

Correct Answer
verified

The conflict between the goals of a firm's owners and the goals of its non-owner managers is ________.

Correct Answer
verified

In a corporation,the board of directors are elected by the ________.

Correct Answer
verified

Which of the following is true of cash flows and risk?

Correct Answer
verified

Economic theories that a financial manager must ensure for efficient business operations,include ________.

Correct Answer
verified

Under which of the following legal forms of organization is ownership readily transferable?

Correct Answer
verified

Exam 1: The Role of Managerial Finance

Which of the following is the best measure to ensure that management decisions are in the best interest of the stockholders?

Correct AnswerverifiedShow Answer

The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer.

Correct AnswerverifiedShow Answer

A sole proprietor has unlimited liability; his or her total investment in a business,but not his or her personal assets,can be taken to satisfy creditors.

Correct AnswerverifiedShow Answer

Which of the following activities of a finance manager determines how the firm raises money to pay for the assets in which it invests?

Correct AnswerverifiedShow Answer

The board of directors is typically responsible for ________.

Correct AnswerverifiedShow Answer

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 wealth maximization goal,the financial manager would choose ________.

Correct AnswerverifiedShow Answer

Incentive plans usually tie management compensation to ________.

Correct AnswerverifiedShow Answer

The true owner(s) of the corporation is (are) the ________.

Correct AnswerverifiedShow Answer

A major weakness of a partnership is ________.

Correct AnswerverifiedShow Answer

Cash flows and risk are the key determinants in share price.Increased cash flow results in ________,other things remaining the same.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

While making financing decisions,a financial manager should ________.

Correct AnswerverifiedShow Answer

In partnerships,partners can readily transfer their wealth to other partners.

Correct AnswerverifiedShow Answer

Which of the following is an example of agency cost?

Correct AnswerverifiedShow Answer

________ is one of the primary responsibilities of a financial manager.

Correct AnswerverifiedShow Answer

The conflict between the goals of a firm's owners and the goals of its non-owner managers is ________.

Correct AnswerverifiedShow Answer

In a corporation,the board of directors are elected by the ________.

Correct AnswerverifiedShow Answer

Which of the following is true of cash flows and risk?

Correct AnswerverifiedShow Answer

Economic theories that a financial manager must ensure for efficient business operations,include ________.

Correct AnswerverifiedShow Answer

Under which of the following legal forms of organization is ownership readily transferable?

Correct AnswerverifiedShow Answer

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