ultiple choice questions

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ultiple choice questions Try the multiple choice questions below to test your knowledge of Chapter 1. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. If your lecturer has requested that you send your results to them, please complete the Routing Information found at the bottom of your graded page and click on the 'E-Mail Results' button. Please DO NOT forward your results unless your lecturer has specifically requested that you do so. This activity contains 21 questions. __________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind. Financial management Profit maximization Agency theory Social responsibility Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored. principals; agents; agents agents; principals; principals principals; agents; principals agents; principals; agents __________ is concerned with the maximization of a firm's earnings after taxes. Shareholder wealth maximization Profit maximization Stakeholder maximization EPS maximization

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Page 1: Ultiple Choice Questions

ultiple choice questions

Try the multiple choice questions below to test your knowledge of Chapter 1. Once you have completed the test, click on 'Submit Answers for Grading' to get your results.

If your lecturer has requested that you send your results to them, please complete the Routing Information found at the bottom of your graded page and click on the 'E-Mail Results' button. Please DO NOT forward your results unless your lecturer has specifically requested that you do so.

This activity contains 21 questions.

__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

  Financial management

Profit maximization

Agency theory

Social responsibility

Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored.

  principals; agents; agents

agents; principals; principals

principals; agents; principals

agents; principals; agents

__________ is concerned with the maximization of a firm's earnings after taxes.

  Shareholder wealth maximization

Profit maximization

Stakeholder maximization

EPS maximization

What is the most appropriate goal of the firm?

Page 2: Ultiple Choice Questions

  Shareholder wealth maximization.

Profit maximization.

Stakeholder maximization.

EPS maximization.

Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

  Profit maximization considers the firm's risk level.

Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.Profit maximization does consider the impact on individual shareholder's EPS.

Profit maximization is concerned more with maximizing net income than the stock price.

__________ is concerned with the branch of economics relating the behavior of principals and their agents.

  Financial management

Profit maximization

Agency theory

Social responsibility

A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues.

  Financial management

Profit maximization

Agency theory

Social responsibility

Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?

Page 3: Ultiple Choice Questions

  Budgets and forecasts

Asset management

Investment management

Financing management

The __________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.

  asset management

financing

investment

capital budgeting

To whom does the Treasurer most likely report?

  Chief Financial Officer.

Vice President of Operations.

Chief Executive Officer.

Board of Directors.

The authors of your textbook suggest that you need to understand financial management even if you have no intention of becoming a financial manager. One reason is that the successful manager of the not-too-distant future will need to be much more of a __________ who has the knowledge and ability to move not just vertically within an organization but horizontally as well. Developing __________ will be the rule, not the exception.

  specialist; specialties

generalist; general business skills

technician; quantitative skills

team player; cross-functional capabilities

Page 4: Ultiple Choice Questions

The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.

  asset management

financing

investment

accounting

How are earnings per share calculated?

  Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value.Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value.

According to the text's authors, what is the most important of the three financial management decisions?

  Asset management decision.

Financing decision.

Investment decision.

Accounting decision.

The __________ decision involves efficiently managing the assets on the balance sheet on a day-to-day basis, especially current assets.

  asset management

financing

investment

accounting

Page 5: Ultiple Choice Questions

Which of the following is not a perquisite (perk)?

  Company-provided automobile.

Expensive office.

Salary.

Country club membership.

Which of the following is not normally a responsibility of the controller of the modern corporation?

  Budgets and forecasts.

Asset management.

Financial reporting to the IRS.

Cost accounting.

All constituencies with a stake in the fortunes of the company are known as __________.

  shareholders

stakeholders

creditors

customers

Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?

  EPS maximization ignores the firm's risk level.

EPS maximization does not specify the timing or duration of expected EPS.

EPS maximization naturally requires all earnings to be retained.

EPS maximization is concerned with maximizing net income.

Page 6: Ultiple Choice Questions

__________ is concerned with the maximization of a firm's stock price.

  Shareholder wealth maximization

Profit maximization

Stakeholder welfare maximization

EPS maximization

Corporate governance success includes three key groups. Which of the following represents these three groups?

  Suppliers, managers, and customers.

Board of Directors, executive officers, and common shareholders.

Suppliers, employees, and customers.

Common shareholders, managers, and employees.

AnswerYour Results for: "Multiple choice questions"

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Site Title:Fundamentals of Financial Management, twelfth edition

Book Title:Fundamentals of Financial Management, twelfth edition

Book Author:

Van Horne/Wachowicz

Location on Site:

Student Resources > Chapter 1 > Multiple choice questions

Date/Time Submitted:

February 15, 2012 at 5:18 PM (UTC/GMT)

Summary of Results24% Correct of 21 Scored items:

5 Correct:  24%16 Incorrect:  76%

More information about scoring

1.__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

Your Answer:

Financial management

Page 7: Ultiple Choice Questions

2.Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored.

Your Answer:agents; principals; principals

Correct Answer:

principals; agents; agents

3.__________ is concerned with the maximization of a firm's earnings after taxes.

Your Answer:Stakeholder maximization

Correct Answer:

Profit maximization

  The interests of stakeholders are considered in wealth maximization, but this is a fake term.

4.What is the most appropriate goal of the firm?

Your Answer:

Shareholder wealth maximization.

5.Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

Your Answer:

Profit maximization is concerned more with maximizing net income than the stock price.

6.__________ is concerned with the branch of economics relating the behavior of principals and their agents.

Your Answer:Financial management

Page 8: Ultiple Choice Questions

Correct Answer:

Agency theory

  It concerns the acquisition, financing, and management of assets with some overall goal in mind.

7.A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues.

Your Answer:Profit maximization

Correct Answer:

Social responsibility

  Profit maximization is generally considered an inappropriate firm goal that maximizes a firm's EAT.

8.Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?

Your Answer:Financing management

Correct Answer:

Budgets and forecasts

  Financial management is indeed one of the responsibilities of the treasurer, whose main responsibilities are generally in the decision areas.

9.The __________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.

Your Answer:asset management

Correct Answer:

financing

  The asset management decision involves managing the assets on the balance sheet on a day-to-day basis, especially current assets.

Page 9: Ultiple Choice Questions

10.

To whom does the Treasurer most likely report?

Your Answer:Vice President of Operations.

Correct Answer:

Chief Financial Officer.

  The treasurer most likely reports to the CFO.

11.

The authors of your textbook suggest that you need to understand financial management even if you have no intention of becoming a financial manager. One reason is that the successful manager of the not-too-distant future will need to be much more of a __________ who has the knowledge and ability to move not just vertically within an organization but horizontally as well. Developing __________ will be the rule, not the exception.

Your Answer:technician; quantitative skills

Correct Answer:

team player; cross-functional capabilities

12.

The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.

Your Answer:

investment

13.

How are earnings per share calculated?

Your Answer:Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.

Correct Answer:

Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.

  Do not include the quantity of preferred shares.

Page 10: Ultiple Choice Questions

14.

According to the text's authors, what is the most important of the three financial management decisions?

Your Answer:Asset management decision.

Correct Answer:

Investment decision.

  The investment decision regarding assets is the most important.

15.

The __________ decision involves efficiently managing the assets on the balance sheet on a day-to-day basis, especially current assets.

Your Answer:financing

Correct Answer:

asset management

  The financing decision involves determining the appropriate make-up of the right side of the balance sheet.

16.

Which of the following is not a perquisite (perk)?

Your Answer:Expensive office.

Correct Answer:

Salary.

  This would be a perquisite for a manager.

17.

Which of the following is not normally a responsibility of the controller of the modern corporation?

Your Answer:Financial reporting to the IRS.

Correct Answer:

Asset management.

  Reporting financial information to the IRS is indeed one of the responsibilities of the controller, whose main responsibilities are generally accounting in nature.

Page 11: Ultiple Choice Questions

18.

All constituencies with a stake in the fortunes of the company are known as __________.

Your Answer:customers

Correct Answer:

stakeholders

  Customers are only one category of stakeholders.

19.

Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?

Your Answer:EPS maximization ignores the firm's risk level.

Correct Answer:

EPS maximization is concerned with maximizing net income.

  This is a weakness of EPS maximization as the stock price could be reduced if the firm is much riskier than a similar firm with less risk but similar EPS.

20.

__________ is concerned with the maximization of a firm's stock price.

Your Answer:

Shareholder wealth maximization

21.

Corporate governance success includes three key groups. Which of the following represents these three groups?

Your Answer:Suppliers, managers, and customers.

Correct Answer:

Board of Directors, executive officers, and common shareholders.

  The three key groups include: (a) Board of Directors; (b) top executive officers; and (c) common shareholders.

Page 12: Ultiple Choice Questions

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