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1 | |
When evaluating a project in which a firm might invest, both the size and the timing of the cash flows are important. |
| | A) | True |
| | B) | False |
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2 | |
Milo, Inc. spends approximately $3 million annually to hire auditors to review the firm's financial statements. This is an example of an indirect agency cost. |
| | A) | True |
| | B) | False |
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3 | |
The board of directors has the power to act on behalf of the shareholders to hire and fire the operating management of a firm. In a legal sense, the directors are "principals" and the shareholders are "agents." |
| | A) | True |
| | B) | False |
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4 | |
The vice-president of finance generally reports directly to the chairman of the board. |
| | A) | True |
| | B) | False |
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5 | |
A manager in charge of working capital determines: |
| | A) | how to raise the money required to fund a project. |
| | B) | how much inventory a firm should maintain. |
| | C) | how many additional shares of stock should be sold. |
| | D) | which projects a firm should undertake. |
| | E) | which fixed assets a firm should purchase. |
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6 | |
Which one of the following is the best description of the goal of a financial manager in a corporation where shares are publicly traded? |
| | A) | maximize sales growth over the short-term |
| | B) | maximize profits over the short-term |
| | C) | avoid financial distress |
| | D) | maintain steady earnings growth |
| | E) | maximize the current value per share of the existing stock |
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7 | |
The duties of a financial manager include determining:I. which marketing strategy to use to promote a product.
II. the most appropriate mix of long-term debt and equity.
III. which projects a firm should undertake.
IV. how much short-term debt to utilize. |
| | A) | I and II only |
| | B) | I, II, and III only |
| | C) | II and III only |
| | D) | II, III, and IV only |
| | E) | I, II, III, and IV |
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8 | |
Ann is interested in purchasing Ted's factory. Since Ann is a poor negotiator, she hires Mary to negotiate a purchase price. Identify the parties to this transaction. |
| | A) | Mary is the principal and Ann is the agent. |
| | B) | Ted is the principal and Ann is the agent. |
| | C) | Ted is the agent and Ann is the principal. |
| | D) | Ann is the principal and Mary is the agent. |
| | E) | Ann is the principal and Ted is the agent. |
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9 | |
A financial manager is responsible for deciding whether or not new manufacturing equipment should be purchased to replace existing equipment. The firm has sufficient cash available to make the purchase. The new equipment would reduce labor expenses and would allow the firm to reduce its investment in inventory. Which of the financial management areas would be involved in this decision?I. capital budgeting
II. capital structure
III. working capital |
| | A) | I only |
| | B) | I and II only |
| | C) | II and III only |
| | D) | I and III only |
| | E) | I, II, and III |
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10 | |
Capital budgeting is the process of: |
| | A) | determining how to raise the money required to fund a project. |
| | B) | choosing how much cash to keep on hand. |
| | C) | deciding the amount of earnings that a firm should retain. |
| | D) | planning and managing a firm's long-term investments. |
| | E) | deciding what marketable securities to purchase. |
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