Question 1

Agency theory deals with the issue of

Accepted Answer

A)   when to hire an agent to represent the firm in negotiations.
B)   the legal liabilities of a firm if an employee, acting as the firm's agent, injures someone.
C)   the limitations placed on an employee acting as the firm's agent to obligate or bind the firm.
D)   the conflicts that can arise between the viewpoints and motivations of a firm's owners and managers.

Question 2

Capital markets refer to those markets dealing with short-term securities having a life of one year or less.

Accepted Answer

A) True 
 B)False

Question 3

Increased use of technology has increased corporate efficiency by

Accepted Answer

A)   increasing the firm's reliance on debt.
B)   creating larger asset values on the firm's balance sheet.
C)   made it cheaper (in terms of interest costs)  for firms to borrow money.
D)   helped to keep corporate costs in check. D

Question 4

Businesses will increasingly rely on B2B Internet applications to speed up cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a major area of concern and emphasis in modern financial management and in this text?

Accepted Answer

A)   Inflation and its effect on profits
B)   Stable short-term interest rates
C)   Changing international environment
D)   Increased reliance on debt

Question 6

The 1990s demonstrated that the old valuation models were no longer effective.

Accepted Answer

A) True 
 B)False

Question 7

What are the 4 components of good corporate governance?

Accepted Answer

Good corporate governance results from:
...

Question 8

Besides maximizing shareholder wealth, what should corporations consider to be goals? List and briefly explain.

Accepted Answer

Corporations, which receive their operat...

Question 9

What is the primary goal of financial management?

Accepted Answer

A)   Increased earnings
B)   Maximizing cash flow
C)   Maximizing shareholder wealth
D)   Minimizing risk of the firm C

Question 10

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Accepted Answer

A) True 
 B)False

Question 11

Agency theory would imply that conflicts are more likely to occur between management and shareholders when

Accepted Answer

A)   the company is owned and operated by the same person.
B)   management acts in the best interests of maximizing shareholder wealth.
C)   the chairman of the board is also the chief executive officer (CEO) .
D)   the board of directors exerts strong and involved oversight of managers.

Question 12

In the past, the study of finance has included

Accepted Answer

A)   securities legislation.
B)   raising capital.
C)   mergers and acquisitions.
D)   all of the other answers are correct

Question 13

Maximization of shareholder wealth is a concept in which

Accepted Answer

A)   increased earnings is of primary importance.
B)   profits are maximized on a quarterly basis.
C)   virtually all earnings are paid as dividends to common shareholders.
D)   optimally increasing the long-term value of the firm is emphasized.

Question 14

Recently, the emphasis of financial management has been on the relationships between risk and return.

Accepted Answer

A) True 
 B)False

Question 15

Proper risk-return management means that

Accepted Answer

A)   the firm should take as few risks as possible.
B)   consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined.
C)   the firm should earn the highest return possible.
D)   the firm should value future profits more highly than current profits.

Question 16

Corporate restructuring has been one result of more institutional ownership. Restructuring can cause

Accepted Answer

A)   changes in the asset and liabilities of the firm.
B)   the sale of low-profit margin divisions.
C)   the removal of current management and/or large reductions in the workforce.
D)   all of the other answers are correct D

Question 17

In terms of revenues and profits, the corporation is by far the most important form of business organization in Canada.

Accepted Answer

A) True 
 B)False

Question 18

Inflation is assumed to be a temporary problem that does not affect financial decisions.

Accepted Answer

A) True 
 B)False

Question 19

The formation of a corporation is a way to circumvent personal liability.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is (are)  a result of high inflation?

Accepted Answer

A)   phantom profits
B)   under-valued assets
C)   lower profitability
D)   all of the other answers are correct

Exam 1: The Goals and Activities of Financial Management

Agency theory deals with the issue of

Correct AnswerverifiedShow Answer

Capital markets refer to those markets dealing with short-term securities having a life of one year or less.

Correct AnswerverifiedShow Answer

Increased use of technology has increased corporate efficiency by

Correct AnswerverifiedD

Businesses will increasingly rely on B2B Internet applications to speed up cash flows.

Correct AnswerverifiedShow Answer

Which of the following is not a major area of concern and emphasis in modern financial management and in this text?

Correct AnswerverifiedShow Answer

The 1990s demonstrated that the old valuation models were no longer effective.

Correct AnswerverifiedShow Answer

What are the 4 components of good corporate governance?

Correct AnswerverifiedGood corporate governance results from:...View AnswerShow Answer

Besides maximizing shareholder wealth, what should corporations consider to be goals? List and briefly explain.

Correct AnswerverifiedCorporations, which receive their operat...View AnswerShow Answer

What is the primary goal of financial management?

Correct AnswerverifiedC

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Correct AnswerverifiedShow Answer

Agency theory would imply that conflicts are more likely to occur between management and shareholders when

Correct AnswerverifiedShow Answer

In the past, the study of finance has included

Correct AnswerverifiedShow Answer

Maximization of shareholder wealth is a concept in which

Correct AnswerverifiedShow Answer

Recently, the emphasis of financial management has been on the relationships between risk and return.

Correct AnswerverifiedShow Answer

Proper risk-return management means that

Correct AnswerverifiedShow Answer

Corporate restructuring has been one result of more institutional ownership. Restructuring can cause

Correct AnswerverifiedD

In terms of revenues and profits, the corporation is by far the most important form of business organization in Canada.

Correct AnswerverifiedShow Answer

Inflation is assumed to be a temporary problem that does not affect financial decisions.

Correct AnswerverifiedShow Answer

The formation of a corporation is a way to circumvent personal liability.

Correct AnswerverifiedShow Answer

Which of the following is (are) a result of high inflation?

Correct AnswerverifiedShow Answer

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D

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Good corporate governance results from:
...
View Answer

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Corporations, which receive their operat...
View Answer

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C

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D

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