CHAPTER 1 AN OVERVIEW OF FI - CHAPTER 1 AN OVERVIEW OF...

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Bing is not responsible for the content of this page. You have reached the cached page for http://fin309.juntak.com/FIN309_Homework_Assignments/Chapter_1.pdf Below is a snapshot of the Web page as it appeared on 9/9/2010 (the last time our crawler visited it). This is the version of the page that was used for ranking your search results. The page may have changed since we last cached it. To see what might have changed (without the highlights), go to the current page . You searched for: " Managers may operate in stockholders' best interests, or managers may " We have highlighted matching words that appear in the page below. Microsoft Word - IFM9 Ch 01 Test Bank.doc Chapter 1 - Page 1 (Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: Goal of firm Answer: b Diff: E 1. The proper goal of the financial manager should be to maximize the firm's expected profit, since this will add the most wealth to each of the individual shareholders (owners) of the firm. a. True b. False Goal of firm Answer: b Diff: E 2. If a firm has a single owner, we may say that the proper goal of a financial manager would be to maximize the firm's earnings per share. a. True b. False Managerial incentives Answer: b Diff: E 3. Performance shares are dollar bonuses awarded to managers on the basis of corporate performance. a. True b. False Agency Answer: b Diff: E 4. If a firm's stock price falls during the year, this indicates that the firm's managers are not acting in shareholders' best interests. a. True b. False Agency Answer: a Diff: E 5. An agency problem exists between stockholders and managers. A second agency problem arises between stockholders and creditors. a. True b. False Agency Answer: b Diff: E 6. An agency relationship exists when one or more persons hire another person to perform some service but withhold decision-making authority from that person. a. True b. False CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT Social welfare and finance Answer: b Diff: E CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT http://cc.bingj.com/cache.aspx?q="Managers+may+operate+in+stockholde. .. 1 of 5 10/3/2010 9:47 PM
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Chapter 1 - Page 2 7. The goal of maximizing stock price is a detriment to society in that few of the actions that result in maximization of stock price also benefit society. a. True b. False Social welfare and finance Answer: a Diff: E 8. If a firm's managers want to maximize stock price it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate. a. True b. False Medium: Managerial incentives Answer: a Diff: M 9. In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with
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CHAPTER 1 AN OVERVIEW OF FI - CHAPTER 1 AN OVERVIEW OF...

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