QuizLL: January 2017

Archive for January 2017

A well-known corporate business that has a philosophical underpinning (core value) of considering the natural environment in its dealings with all stakeholders is engaging in sustainability.

Answer:False

Corporate governance refers to the system by which the firm hires and manages employees.

Answer:False

The greater the ownership percentage of managers, then the more likely the managers will behave in a shareholder wealth maximizing behavior.

Answer:True

The financing decision involves determining how the assets will be financed with regards to the type and mix as well as the best dividend policy.

Answer:True

The asset management decision involves determining the optimal firm size and the assets that should be acquired or eliminated.

Answer:False

Cash management is a responsibility of the Controller.

Answer:False

Capital budgeting is a responsibility of the Treasurer.

Answer:True

Corporate governance success includes three key groups. Which of the following represents these three groups?

A.) Suppliers, managers, and customers.
B.) Board of Directors, executive officers, and common shareholders.
C.) Suppliers, employees, and customers.
D.) Common shareholders, managers, and employees.

Answer: B

_____ is concerned with the maximization of a firm's stock price.

A.) Shareholder wealth maximization
B.) Profit maximization
C.) Stakeholder welfare maximization
D.) EPS maximization

Answer: A

Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?

A.) EPS maximization ignores the firm's risk level.
B.) EPS maximization does not specify the timing or duration of expected EPS.
C.) EPS maximization naturally requires all earnings to be retained.
D.) EPS maximization is concerned with maximizing net income.

Answer: D

All constituencies with a stake in the fortunes of the company are known as __________.

A.) shareholders
B.) stakeholders
C.) creditors
D.) customers

Answer: B

Which of the following is not normally a responsibility of the controller of the modern corporation?

A.) Budgets and forecasts.
B.) Asset management.
C.) Financial reporting to the IRS.
D.) Cost accounting.

Answer: B

Which of the following is not a perquisite (perk)?

A.) Company-provided automobile.
B.) Expensive office.
C.) Salary.
D.) Country club membership.

Answer: C

The __________ decision involves efficiently managing the assets on the balance sheet on a day-to-day basis, especially current assets.

A.) asset management
B.) financing
C.) investment
D.) accounting

Answer: A

According to the text's authors, what is the most important of the three financial management decisions?

A.) Asset management decision.
B.) Financing decision.
C.) Investment decision.
D.) Accounting decision.

Answer: C

How are earnings per share calculated?

A.) Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value.
B.) Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.
C.) Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.
D.) Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value.

Answer: B

The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.

A.) asset management
B.) financing
C.) investment
D.) accounting

Answer: C

The authors of your textbook suggest that you need to understand financial management even if you have no intention of becoming a financial manager. One reason is that the successful manager of the not-too-distant future will need to be much more of a who has the knowledge and ability to move not just vertically within an organization but horizontally as well. Developing will be the rule, not the exception.

A.) specialist; specialties
B.) generalist; general business skills
C.) technician; quantitative skills
D.) team player; cross-functional capabilities

Answer: D

To whom does the Treasurer most likely report?

A.) Chief Financial Officer.
B.) Vice President of Operations.
C.) Chief Executive Officer.
D.) Board of Directors.

Answer: A

The __________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.

A.) asset management
B.) financing
C.) investment
D.) capital budgeting

Answer: B

Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?

A.) Budgets and forecasts
B.) Asset management
C.) Investment management
D.) Financing management

Answer: A

A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues.

A.) Financial management
B.) Profit maximization
C.) Agency theory
D.) Corporate social responsibility

Answer: D

______ is concerned with the branch of economics relating the behavior of principals and their agents.

A.) Financial management
B.) Profit maximization
C.) Agency theory
D.) Corporate social responsibility

Answer: C

Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

A.) Profit maximization considers the firm's risk level.
B.) Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.
C.) Profit maximization does consider the impact on individual shareholder's EPS.
D.) Profit maximization is concerned more with maximizing net income than the stock price.

Answer: D

What is the most appropriate goal of the firm?

A.) Shareholder wealth maximization.
B.) Profit maximization.
C.) Stakeholder maximization.
D.) EPS maximization.

Answer: A

______ is concerned with the maximization of a firm's earnings after taxes.

A.) Shareholder wealth maximization
B.) Profit maximization
C.) Stakeholder maximization
D.) EPS maximization

Answer: B

Jensen and Meckling showed that can assure themselves that the will make optimal decisions only if appropriate incentives are given and only if the __ are monitored.

A.) principals; agents; agents
B.) agents; principals; principals
C.) principals; agents; principals
D.) agents; principals; agents

Answer: A

____ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

A.) Financial management
B.) Profit maximization
C.) Agency theory
D.) Social responsibility

Answer: A

Sustainability is usually in conflict with the idea of Corporate Social Responsibility (CSR).

Answer:False

It is much more common in the US to have a company's CEO serve as chairman of the board of directors than it is in the UK.

Answer:True

In the US, the Public Company Accounting Oversight Board (PCAOB) appoints the chairman and the members of the Securities and Exchange Commission (SEC).

Answer:False

The stakeholders of a corporation are all constituencies with a stake in the fortunes of the company. They include shareholders, creditors, customers, employees, suppliers, and local communities.

Answer:True

The price of a share of common stock acts as a barometer indicating how well management is doing on behalf of shareholders.

Answer:True

Corporate Social Responsibility (CSR) is usually in conflict with the objective of shareholder wealth maximization.

Answer:False

Maximizing the price of a share of the firm's common stock is the equivalent of maximizing the wealth of the firm's present owners.

Answer:True

Corporate management, acting as the owners' agent, makes all decisions in the owners' best interests.

Answer:False

In a large corporation, the firm's owners are usually also its top managers.

Answer:False

The goal of the firm should be to maximize earnings per share.

Answer:False

Deciding on the total amount of assets needed by the firm is a key step in the investment decision.

Answer:True

A goal or objective is a necessary first step for effective financial management

A goal or objective is a necessary first step for effective financial management.

Answer:True

Rapid technological change and worldwide economic uncertainty are factors that may affect the job of the financial manager

Answer:True

Financial managers of today have fewer responsibilities than their counterparts of the early 20th century.

Answer:False

______ refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs.

A.) Corporate Social Responsibility (CSR)

B.) Sustainability

C.) Convergence

D.) Green Economics

Answer: B

The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to:

A.) a series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco and numerous others.

B.) a dramatic rise in the US trade deficit.

C.) charges of excessive compensation to top corporate executives.

D.) rising complaints by investors and security analysts over the financial accounting for stock options.

Answer: A

A company's is (are) potentially the most effective instrument of good corporate governance.

A.) common stock shareholders

B.) board of directors

C.) top executive officers

Answer: B

In the US, the has been given the power to adopt auditing, quality control, ethics, and disclosure standards for public companies and their auditors as well as investigate and discipline those involved.

A.) American Institute of Certified Public Accountants (AICPA)

B.) Financial Accounting Standards Board (FASB)

C.) Public Company Accounting Oversight Board (PCAOB)

D.) Securities and Exchange Commission (SEC)

Answer: C

The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily related to .

A.) operational; financial management

B.) financial management; accounting

C.) accounting; financial management

D.) financial management; operations

Answer: C

The decision function of financial management can be broken down into the decisions.

A.) financing and investment

B.) investment, financing, and asset management

C.) financing and dividend

D.) capital budgeting, cash management, and credit management

Answer: B

The focal point of financial management in a firm is:

A.) the number and types of products or services provided by the firm.

B.) the minimization of the amount of taxes paid by the firm.

C.) the creation of value for shareholders.

D.) the dollars profits earned by the firm.

Answer: C

The market price of a share of common stock is determined by:

A.) the board of directors of the firm.

B.) the stock exchange on which the stock is listed.

C.) the president of the company.

D.) individuals buying and selling the stock.

Answer: D

A(n) would be an example of a principal, while a(n) would be an example of an agent.

A.) shareholder; manager

B.) manager; owner

C.) accountant; bondholder

D.) shareholder; bondholder

Answer: A

What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?

A.) $100,000

B.) $6.00

C.) $0.50

D.) $6.50

Answer: C

The long-run objective of financial management is to:

A.) maximize earnings per share.

B.) maximize the value of the firm's common stock.

C.) maximize return on investment.

D.) maximize market share.

Answer: B

"Shareholder wealth" in a firm is represented by:

A.) the number of people employed in the firm.

B.) the book value of the firm's assets less the book value of its liabilities.

C.) the amount of salary paid to its employees.

D.) the market price per share of the firm's common stock.

Answer: D

A well-known corporate business that has a philosophical underpinning (core value) of considering the natural environment in its dealings with all stakeholders is engaging in sustainability.

Corporate governance refers to the system by which the firm hires and manages employees.

The greater the ownership percentage of managers, then the more likely the managers will behave in a shareholder wealth maximizing behavior.

The financing decision involves determining how the assets will be financed with regards to the type and mix as well as the best dividend policy.

The asset management decision involves determining the optimal firm size and the assets that should be acquired or eliminated.

Cash management is a responsibility of the Controller.

Capital budgeting is a responsibility of the Treasurer.

Corporate governance success includes three key groups. Which of the following represents these three groups?

_____ is concerned with the maximization of a firm's stock price.

Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?

All constituencies with a stake in the fortunes of the company are known as __________.

Which of the following is not normally a responsibility of the controller of the modern corporation?

Which of the following is not a perquisite (perk)?

The __________ decision involves efficiently managing the assets on the balance sheet on a day-to-day basis, especially current assets.

According to the text's authors, what is the most important of the three financial management decisions?

How are earnings per share calculated?

The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.

To whom does the Treasurer most likely report?

The __________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.

Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?

A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues.

______ is concerned with the branch of economics relating the behavior of principals and their agents.

Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

What is the most appropriate goal of the firm?

______ is concerned with the maximization of a firm's earnings after taxes.

Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored.

____ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

Sustainability is usually in conflict with the idea of Corporate Social Responsibility (CSR).

It is much more common in the US to have a company's CEO serve as chairman of the board of directors than it is in the UK.

In the US, the Public Company Accounting Oversight Board (PCAOB) appoints the chairman and the members of the Securities and Exchange Commission (SEC).

The stakeholders of a corporation are all constituencies with a stake in the fortunes of the company. They include shareholders, creditors, customers, employees, suppliers, and local communities.

The price of a share of common stock acts as a barometer indicating how well management is doing on behalf of shareholders.

Corporate Social Responsibility (CSR) is usually in conflict with the objective of shareholder wealth maximization.

Maximizing the price of a share of the firm's common stock is the equivalent of maximizing the wealth of the firm's present owners.

Corporate management, acting as the owners' agent, makes all decisions in the owners' best interests.

In a large corporation, the firm's owners are usually also its top managers.

The goal of the firm should be to maximize earnings per share.

Deciding on the total amount of assets needed by the firm is a key step in the investment decision.

A goal or objective is a necessary first step for effective financial management.

Rapid technological change and worldwide economic uncertainty are factors that may affect the job of the financial manager

Financial managers of today have fewer responsibilities than their counterparts of the early 20th century.

______ refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs.

The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to:

A company's is (are) potentially the most effective instrument of good corporate governance.

In the US, the has been given the power to adopt auditing, quality control, ethics, and disclosure standards for public companies and their auditors as well as investigate and discipline those involved.

The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily related to .

The decision function of financial management can be broken down into the decisions.

The focal point of financial management in a firm is:

The market price of a share of common stock is determined by:

A(n) would be an example of a principal, while a(n) would be an example of an agent.

What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?

The long-run objective of financial management is to:

"Shareholder wealth" in a firm is represented by:

Jensen and Meckling showed that can assure themselves that the will make optimal decisions only if appropriate incentives are given and only if the __ are monitored.