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?

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?
Budgets and forecasts Asset management Investment management Financing management

The __________ decision involves determining the appropriate makeup 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

asset management financing investment accounting

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.

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

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.

__________ 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.

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Site Title: Fundamentals of Financial Management, twelfth edition

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24% Correct of 21 Scored items:

Book Title: Fundamentals of Financial Management, twelfth edition Book Van Horne/Wachowicz Author: Location on Student Resources > Chapter 1 Site: > Multiple choice questions Date/Time February 15, 2012 at 5:18 PM Submitted: (UTC/GMT)

5 Correct: 16 Incorrect:

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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

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

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.

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.

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.

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.

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