Ch.1_Review_Questions - A I only B I and III only C II only...

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Ch.1 Review Questions – 2 marks each 1. Which of the following should be the goal of the financial manager of a corporation? A) To maximize the company profit B) To maximize the revenues on the income statement C) To maximize current market value of the stock D) To maximize market share 2. Which of the following help ensure managers act in the best interest of owners? I. A compensation package for managers that ties their salary to the firm's share price II. The threat that if the firm does poorly, shareholders will use a proxy fight the replace existing management; III. There is a high degree of likelihood the firm will become a takeover candidate if the firm performs poorly’ 3. Which of the following is/are considered a benefit of the corporate form of organization? I. Ease of the transfer of ownership II. Limited life III. Double taxation
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Unformatted text preview: A) I only B) I and III only C) II only D) I, II, and III 4. A corporation’s board of directors: A) is selected by and can be removed by management. B) can be voted out of power by the shareholders. C) has a lifetime appointment to the board. D) is also elected by customers of the corporation. 5. “Double taxation” refers to: A) all partners paying equal taxes on profits. B) corporations paying taxes on both dividends and retained earnings. C) paying taxes on profits at the corporate level and on dividends at the personal level. D) the fact that marginal tax rates are doubled for corporations. 6. An example of a firm’s financing decision would include: A) acquisition of a competitive firm. B) how much to pay for a specific asset. C) the issuance of ten-year versus twenty-year bonds. D) whether or not to increase the price of its products....
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