ch1b - Question 1 CORRECT? Student response: Student...

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Question 1 (1 point) Which of the following statements is CORRECT? Student response: Student Respons e Answer Choices a. The proper goal of the financial manager should be to attempt to maximize the firm's expected cash flows, because this will add the most to the wealth of the individual shareholders. b . The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon, generally the coming year. c. The riskiness inherent in a firm's earnings per share (EPS) depends on the characteristics of the projects the firm selects, and thus on the firm's assets. However, EPS is not affected by the manner in which those assets are financed. d . Potential agency problems can arise between stockholders and managers, because managers hired as agents to act on behalf of the owners may instead make decisions favorable to themselves rather than the stockholders. e. Large, publicly-owned firms like AT&T and GM are controlled by their management teams. Ownership is generally widely dispersed, hence managers have great freedom in how they manage the firm. Managers may operate in stockholders' best interests, but they may also operate in their own personal best interests. As long as managers stay within the law, there is no way to either force or motivate them to act in the stockholders' best interests.
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Score:1 / 1 Question 2 (1 point) Which of the following statements is CORRECT? Student response: Student Respons e Answer Choices a. Most businesses (by number and total dollar sales) are organized as proprietorships or partnerships because it is easier to set up and operate in one of these forms rather than as a corporation. However, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships. b . Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U. S. businesses (in terms of number of businesses) are organized as corporations. c. Due to legal considerations related to ownership transfers and limited liability, most business (measured by dollar sales) is conducted by corporations in spite of large corporations' often less favorable tax treatment. d
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ch1b - Question 1 CORRECT? Student response: Student...

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