FINANCE 3110 Chapter 1 | Questions and Answers The primary role of the firm is shareholder wealth maximization The shareholder wealth maximization goal states that the management should seek to maximize the ______ of
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FINANCE 3110 Chapter 1 | Questions and Answers The primary role of the firm is shareholder wealth maximization The shareholder wealth maximization goal states that the management should seek to maximize the ______ of the expected future returns to the owners of the firm present value Financial managers can take a variety of actions to influence the market value of a company's stock. All of the following are classifications of actions taken EXCEPT _____ decisions. tax implications Shareholder wealth is measured by the ____ value of the shareholders' common stock holdings. Market The limitations of the profit maximization goal include which of the following? a. It lacks a time dimension (i.e., it is static). b. It fails to consider risk with alternative decisions. c. The definition of profit is ambiguous. d. all of the above The objective of maximizing shareholder wealth, as measured by the market value of the firm's stock, ____ provides a way to consider the risk of the benefits expected The two most important disciplines on which financial management relies are accounting and economics Which of the following is NOT a professional certification for careers in the field of finance certified financial analyst (CFA) When considering the risk of receiving cash flows, financial managers must be aware that investors _____. want higher returns for perceived greater risk A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers _____. the timing and the risk of the expected benefits to be received The primary reason for the divergence between the shareholder wealth maximization goal and the actual goals pursued by management has been attributed to _____. separation of ownership and control Giving top management ____ is one method that ensures managers will act in the interest of shareholders in merger decisions "golden parachute" contracts ____ arise from the divergent objectives between owners and managers. agency problems Agency costs include all of the following EXCEPT flotation costs does include---expenditures to monitor management's actions, providing stock as part of management's compensation and bonding expenditures A potential agency conflict can arise between stockholders and creditors because owners may _____. increase the risk of a firm's investments Creditors have a fixed financial claim on a company's resources through all of the following EXCEPT _____. preferred stock Agency problems may give rise to constraints that ____ the market value of firms. Decrease All of the following are problems with the microeconomic profit maximization model EXCEPT _____. offers financial managers insights to a wide range of problems ____ are largely outside of the direct control of managers. economic environment factors The success of a firm is linked to its stakeholders. This group includes _____. communities in which they operate, suppliers, employees (all of the above) 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 _____. involving all parties with a financial interest in the outcome Many entrepreneurs are ____ diversified with respect to their personal wealth. Poorly ____ deals with economic decisions of individuals, households, and firms. Microeconomics Financial management draws heavily on the following related disciplines: accounting, macroeconomics, microeconomics (all of the above) The chief financial officer (CFO) normally has responsibility for all of the following EXCEPT _____. advertising strategy The controller normally has responsibility for all ____ related activities, while the treasurer is normally concerned with ____. accounting; expenditure of funds Per the shareholder wealth maximization goal, management should seek to maximize the ____ of the ____ to owners. present value; expected future returns Shareholder wealth is measured by the ____. market value of the shareholders' common stock holdings Among the most important agency relationships in the context of finance is (are) the relationship(s) between ____. stockholders and creditors Protective covenants in a company's bond indentures are used in agency relationships involving ____. stockholders and creditors The chief financial officer (CFO) of a corporation normally reports to the ____ of the company. chief executive officer The ____ has a goal of serving as a bridge between academic study of finance and the application of financial principles by financial managers. Financial Management Association All of the following economic environment factors affect stock prices EXCEPT _____. investment strategies The major factors that determine the market value of a company's shares of stock include all of the following EXCEPT ____. book value of its assets There is often a divergence between the shareholder wealth maximization goal and the actual goals pursued by management. The primary reason for this is ____. separation of ownership and control
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