Exam 1 Sample - Solutions

Exam 1 Sample - Solutions - BUSI 105 Financial Management...

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Financial Management EXAM # 1 NAME Solutions Multiple Choice, True/False, Short Answer . Circle the best answer. Each question is worth 3 points unless otherwise indicated. 1. (4 points) What’s it all about? Be specific. It’s all about cash flows!!!  How big they are, when they happen, and how risky they are. 2. The primary goal of a publicly-owned firm interested in serving its shareholders should be to a. Maximize expected total corporate profit. b. Maximize expected net income. c. Maximize expected total corporate profit. Maximize the stock price per share. Note:  this is equivalent to maximizing shareholder  wealth. 3. Which of the following actions is/are likely to reduce the agency conflict between stockholders and managers. a. Paying managers a large fixed salary. Compensating managers with stock and stock options. c. Placing restrictive covenants in debt agreements. d. All of the answers above are correct. 4. Net income is found on which of the four basic financial statements? a. Income Statement b. Statement of Retained Earnings c. Statement of Cash Flows Net income can be found on all of the above financial statements. 5. The value of any asset is a. The price the firm paid for the asset when it was purchased. b. The price the firm paid for the asset when it was purchased, adjusted for inflation. The present value of the future cash flows the asset is expected to produce. d. The future value of last year’s net income, adjusted for inflation. 6. 70% of the dividends received by corporations is excluded from taxable income. True
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This note was uploaded on 04/04/2012 for the course BUSINESS 033 taught by Professor Eric during the Spring '08 term at uot.

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Exam 1 Sample - Solutions - BUSI 105 Financial Management...

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