Chapter 1--An Overview of M - Chapter 1-An Overview of...

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Chapter 1--An Overview of Managerial Finance Chapter 1--An Overview of Managerial Finance Student: ___________________________________________________________________________ 1. In general, the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm. True False 2. The financial manager must execute his or her duties independent of the other activities of the firm in order to properly maximize the value of the firm. True False 3. Two key limitations of the proprietorship form of business involve potential difficulty in raising needed capital and the presence of unlimited personal liability for business debts. True False 4. A hostile takeover involves an attempt by one group of stockholders to solicit votes from other stockholders in order to put a new management team into place and is usually motivated by low stock price. True False 5. No firm can take cost-increasing, socially responsible actions in a competitive marketplace and expect to continue to compete, even if those cost-increasing actions yield significant benefits to the firm. True False 6. The proper goal of the financial manager should be to maximize the firm's expected profit, because this will add the most wealth to each of the individual shareholders (owners) of the firm. True False
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7. One way to state the decision framework most useful for carrying out the firm's objective is that the financial managers should seek that combination of assets, liabilities, and capital which will generate the largest expected projected income over the relevant time horizon. True False 8. The riskiness inherent in a firm's earnings per share (EPS) depends on both the types of projects the firm takes on and the manner in which the projects are financed. True False 9. Cultural differences do not impact the multinational corporations as they expand into different geographic regions. True False 10. Normal profits are those that result in rates of return that are just sufficient to attract new capital in financial markets. True False 11. 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. True False 12. In a competitive marketplace "good ethics" is a wonderful idea but an impractical standard. There are simply too few benefits to be gained from maintaining high business ethics. True False 13. Exchange rate risk is the risk that the cash flows from a foreign project will be worth less than those same cash flows denominated in the parent company's home currency. True False
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This note was uploaded on 01/18/2011 for the course FIN 3604 taught by Professor Patterson during the Spring '10 term at University of South Florida - Tampa.

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Chapter 1--An Overview of M - Chapter 1-An Overview of...

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