FINANCE 3110 Chapter 1 | Questions and Answers The primary role of the firm is shareholder wealth maximization The shareholder wealth maximization goal states that the management should seek to maximize the ______ of the expected future returns to the owners of the firm present value Financial m...
The primary role of the firm is
shareholder wealth maximization
The shareholder wealth maximization goal states that the management should seek to
maximize the ______ of the expected future returns to the owners of the firm
present value
Financial managers can take a variety of actions to influence the market value of a
company's stock. All of the following are classifications of actions taken EXCEPT _____
decisions.
tax implications
Shareholder wealth is measured by the ____ value of the shareholders' common stock
holdings.
Market
The limitations of the profit maximization goal include which of the following?
a. It lacks a time dimension (i.e., it is static).
b. It fails to consider risk with alternative decisions.
c. The definition of profit is ambiguous.
d. all of the above
The objective of maximizing shareholder wealth, as measured by the market value of
the firm's stock, ____
provides a way to consider the risk of the benefits expected
The two most important disciplines on which financial management relies are
accounting and economics
Which of the following is NOT a professional certification for careers in the field of
finance
certified financial analyst (CFA)
When considering the risk of receiving cash flows, financial managers must be aware
that investors _____.
want higher returns for perceived greater risk
A major advantage of using the maximization of shareholder wealth as the primary goal
of the firm is that this goal considers _____.
the timing and the risk of the expected benefits to be received
, The primary reason for the divergence between the shareholder wealth maximization
goal and the actual goals pursued by management has been attributed to _____.
separation of ownership and control
Giving top management ____ is one method that ensures managers will act in the
interest of shareholders in merger decisions
"golden parachute" contracts
____ arise from the divergent objectives between owners and managers.
agency problems
Agency costs include all of the following EXCEPT
flotation costs
does include---expenditures to monitor management's actions, providing stock as part of
management's compensation and bonding expenditures
A potential agency conflict can arise between stockholders and creditors because
owners may _____.
increase the risk of a firm's investments
Creditors have a fixed financial claim on a company's resources through all of the
following EXCEPT _____.
preferred stock
Agency problems may give rise to constraints that ____ the market value of firms.
Decrease
All of the following are problems with the microeconomic profit maximization model
EXCEPT _____.
offers financial managers insights to a wide range of problems
____ are largely outside of the direct control of managers.
economic environment factors
The success of a firm is linked to its stakeholders. This group includes _____.
communities in which they operate, suppliers, employees (all of the above)
Techniques identified by John Casey that managers could keep in mind when
addressing the ethical dimensions of a business problem include all of the following
EXCEPT _____.
involving all parties with a financial interest in the outcome
Many entrepreneurs are ____ diversified with respect to their personal wealth.
Poorly
____ deals with economic decisions of individuals, households, and firms.
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