FIN 300 EXAM 1 || ALL ANSWERS ARE VALID.
Profit maximization as a goal of the firm:
is an economic principle and not an accounting one
is superior to other goals that could be pursued
maximizes the wealth of the owners
does not consider cash flow or risk correct answers does not consider cash flow or risk
Wealth maximization as a goal of the firm:
is usually discounted by bondholders
takes a long-run perspective and focuses on the owners of the firm
is a long-run perspective used by financial managers for internal use only
is an accounting number correct answers takes a long-run perspective and focuses on the owners
of the firm
An important advantage a general partner usually has is:
limited liability
usually a larger share of profit distribution when the firm is successful
unlimited liability
profits received are tax-free correct answers usually a larger share of profit distribution when the
firm is successful
A Subchapter S corporation:
is a large corporation
has limited liability for its owners
,is double taxed
has unlimited liability for its owners correct answers has limited liability for its owners
One of the most important disadvantages of the corporate form of business is:
shares that can be sold
professional managers
double taxation
unlimited owner liability correct answers double taxation
A manager has responsibilities to stockholders:
for legal and ethical issues
only at firms that are public corporations
never
only where legal issues apply correct answers or legal and ethical issues
Problems with seeking profit as a goal of the firm would include each of the following except:
profit is completely unrelated to cash flow
profit goals involve timing issues
accountants have different ways of measuring profit
profit is only a proxy for cash flow correct answers accountants have different ways of
measuring profit
Which statement is correct about limited partners?
they have management control equal to their percent of investment
they have no tax liability
, they can lose only one half of their initial investment
there is no limit to the number of limited partners that may participate correct answers there is no
limit to the number of limited partners that may
Which of the following would least affect the value of a firm's stock?
cashflows
market share
timing on cash flows
risk associated with receiving cash flows correct answers market share
Which of the following areas of finance is concerned with internal decision-making of a
business?
Financial markets and institutions
Correct! Financial Management
Investments
Agency Issues correct answers
The term "financial management" refers to:
The variety of job titles often given to financial managers.
The duties of the one person who makes most of the financial decisions.
Correct! The process of decision-making that produces value.
The chief financial officer (CFO). correct answers
"The primary financial goal of the business firm is to maximize the wealth of the firm's owners."
For a corporation, this statement means that managers should focus on maximizing the wealth of
its shareholders or its:
Correct! market value
sales revenue
Profit maximization as a goal of the firm:
is an economic principle and not an accounting one
is superior to other goals that could be pursued
maximizes the wealth of the owners
does not consider cash flow or risk correct answers does not consider cash flow or risk
Wealth maximization as a goal of the firm:
is usually discounted by bondholders
takes a long-run perspective and focuses on the owners of the firm
is a long-run perspective used by financial managers for internal use only
is an accounting number correct answers takes a long-run perspective and focuses on the owners
of the firm
An important advantage a general partner usually has is:
limited liability
usually a larger share of profit distribution when the firm is successful
unlimited liability
profits received are tax-free correct answers usually a larger share of profit distribution when the
firm is successful
A Subchapter S corporation:
is a large corporation
has limited liability for its owners
,is double taxed
has unlimited liability for its owners correct answers has limited liability for its owners
One of the most important disadvantages of the corporate form of business is:
shares that can be sold
professional managers
double taxation
unlimited owner liability correct answers double taxation
A manager has responsibilities to stockholders:
for legal and ethical issues
only at firms that are public corporations
never
only where legal issues apply correct answers or legal and ethical issues
Problems with seeking profit as a goal of the firm would include each of the following except:
profit is completely unrelated to cash flow
profit goals involve timing issues
accountants have different ways of measuring profit
profit is only a proxy for cash flow correct answers accountants have different ways of
measuring profit
Which statement is correct about limited partners?
they have management control equal to their percent of investment
they have no tax liability
, they can lose only one half of their initial investment
there is no limit to the number of limited partners that may participate correct answers there is no
limit to the number of limited partners that may
Which of the following would least affect the value of a firm's stock?
cashflows
market share
timing on cash flows
risk associated with receiving cash flows correct answers market share
Which of the following areas of finance is concerned with internal decision-making of a
business?
Financial markets and institutions
Correct! Financial Management
Investments
Agency Issues correct answers
The term "financial management" refers to:
The variety of job titles often given to financial managers.
The duties of the one person who makes most of the financial decisions.
Correct! The process of decision-making that produces value.
The chief financial officer (CFO). correct answers
"The primary financial goal of the business firm is to maximize the wealth of the firm's owners."
For a corporation, this statement means that managers should focus on maximizing the wealth of
its shareholders or its:
Correct! market value
sales revenue
