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"Shareholder wealth" in a firm is represented by:

the number of people employed in the firm.
the book value of the firm's assets less the book value of its liabilities.
the amount of salary paid to its employees.
the market price per share of the firm's common stock.
2. The long-run objective of financial management is to:
maximize earnings per share.
maximize the value of the firm's common stock.
maximize return on investment.
maximize market share.
3. What are the earnings per share (EPS) for a company that earned $100,000 last year in aftertax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the
year end?
4. A(n)
an agent.

would be an example of a principal, while a(n)

shareholder; manager
manager; owner
accountant; bondholder
shareholder; bondholder

would be an example of

5. The market price of a share of common stock is determined by:

the board of directors of the firm.
the stock exchange on which the stock is listed.
the president of the company.
individuals buying and selling the stock.
6. The focal point of financial management in a firm is:
the number and types of products or services provided by the firm.
the minimization of the amount of taxes paid by the firm.
the creation of value for shareholders.
the dollars profits earned by the firm.
7. The decision function of financial management can be broken down into the
financing and investment
investment, financing, and asset management
financing and dividend
capital budgeting, cash management, and credit management
8. The controller's responsibilities are primarily
responsibilities are primarily related to
operational; financial management
financial management; accounting
accounting; financial management
financial management; operations

in nature, while the treasurer's


9. A company's

is (are) potentially the most effective instrument of good corporate

common stock shareholders

board of directors
top executive officers
10. ___________ refers to meeting the needs of the present without compromising the ability of
future generations to meet their own needs.
Corporate Social Responsibility (CSR)
Green Economics

1. The field of finance is closely related to the fields of:

A) statistics and economics

B) statistics and risk analysis
C) economics and accounting
D) accounting and comparative return analysis
2. The first area of study to benefit from the focus in the 1950's to a more analytical,
decision oriented approach was:
A) cash and inventory management
capital budgeting (allocating financial capital to the purchase of plant and
C) capital structure formulation (the balance between liabilities and equity)
D) dividend policy ( the relationship between dividends and earnings)
3. The ultimate measure of performance is:
A) the amount of the firm's earnings
B) how the earnings are valued by the investor
C) the firm's profit margin
D) return on the firm's total assets
4. Which of the following is not the responsibility of financial management?
A) allocation of funds to current and capital assets
B) obtaining the best mix of financing alternatives
C) preparation of the firm's accounting statements
D) development of an appropriate dividend policy
5. Which of the following are not among the daily activities of financial management?

A) sale of shares and bonds

B) credit management
C) inventory control
D) the receipt and disbursement of funds
6. A main benefit to the corporate form of organization is:
A) double taxation of corporate income
B) simplicity of decision making and low organizational complexity
C) limited liability for the corporate shareholders
D) a major management role exists for the firm's owners
7. In analyzing the firm, the investor should consider:
A) the risk inherent in the firm's operation
B) the time patterns over which the firm's earnings increase/decrease
C) the quality and reliability of the firm's reported earnings
D) all of the above should be considered
8. Agency theory examines the:
A) relationship between the owners and managers of the firm
B) insurability of the firm's assets
C) relationship between dividend policy and firm value
D) value of the firm relative to other firms in the industry
9. Financial markets:
A) exist as a vast global network of individuals and financial institutions
include a broad group representing lenders, borrowers, owners, institutional
investors, corporations, government units and others
C) circulate information quickly that affects prices of securities
D) all of the above

10.Capital is allocated by financial markets by:
A) a lottery system between investment dealers
B) pricing securities based on their risk and expected future cash flows
C) by pricing risky securities higher than low-risk securities
by a government risk-rating system based on AAA for low risk and CCC for
high risk

11.The allocation of capital is determined by:

A) expected rates of return
B) the Bank of Canada
C) the initial sale of securities in the primary market
D) the size of the federal debt
12. The mix of debt and equity in a firm is referred to as the firm's:
A) primary capital
B) capital composition
C) cost of capital
D) capital structure
13. The main focus of finance for the last 40 years has been:
A) mergers and acquisitions
B) conglomerate firms
C) inflation
D) risk-return relationships