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Solution Manual For Finance for Executives Managing for Value Creation, 7th Edition by Gabriel Hawawini, Claude Viallet Chapter 2-18 WITH RATIONALES GUARANTEED PASS A+$17.99
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Solution Manual For Finance for Executives Managing for Value Creation, 7th Edition by Gabriel Hawawini, Claude Viallet Chapter 2-18 WITH RATIONALES GUARANTEED PASS A+
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Course
Finance 1
Institution
Finance 1
Solution Manual For Finance for Executives Managing
for Value Creation, 7th Edition by Gabriel Hawawini,
Claude Viallet Chapter 2-18 WITH RATIONALES
GUARANTEED PASS A+
s
1. What is the primary goal of financial management?
o A) Maximize sales
o B) Maximize shareholder wealth
o C) Minimiz...
Solution Manual For Finance for Executives Managing
for Value Creation, 7th Edition by Gabriel Hawawini,
Claude Viallet Chapter 2-18 WITH RATIONALES
GUARANTEED PASS A+
s
1. What is the primary goal of financial management?
o A) Maximize sales
o B) Maximize shareholder wealth
o C) Minimize costs
o D) Maximize market share
o Answer: B) Maximize shareholder wealth
Rationale: The main objective of financial management is to maximize the value
of the firm for its shareholders.
2. Which of the following is a measure of a company's profitability?
o A) Current ratio
o B) Debt-to-equity ratio
o C) Return on equity (ROE)
o D) Quick ratio
o Answer: C) Return on equity (ROE)
Rationale: ROE measures the amount of net income returned as a percentage of
shareholders' equity, indicating profitability.
3. What does the term "liquidity" refer to in finance?
o A) The ability to generate profits
o B) The ability to meet short-term obligations
o C) The rate of return on investments
o D) The total amount of debt
o Answer: B) The ability to meet short-term obligations
Rationale: Liquidity refers to how easily assets can be converted into cash to
meet short-term liabilities.
4. Which of the following is considered a long-term financing source?
o A) Trade credit
o B) Bank loans
o C) Bonds
o D) Accounts payable
o Answer: C) Bonds
Rationale: Bonds are long-term debt instruments used to raise capital, typically
with maturities longer than one year.
5. What does the term "cost of capital" refer to?
o A) The expense incurred to obtain funding
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o B) The minimum return expected by investors
o C) The total amount of debt
o D) The rate of inflation
o Answer: B) The minimum return expected by investors
Rationale: The cost of capital represents the return required by investors for
providing capital to the company.
6. In capital budgeting, which method is used to evaluate the profitability of an
investment?
o A) Payback period
o B) Net present value (NPV)
o C) Internal rate of return (IRR)
o D) All of the above
o Answer: D) All of the above
Rationale: All listed methods (payback period, NPV, and IRR) are commonly
used in capital budgeting to assess investment profitability.
7. What does the term "diversification" mean in investment?
o A) Investing in a single asset
o B) Spreading investments across various assets
o C) Investing in foreign markets
o D) Reducing the risk of inflation
o Answer: B) Spreading investments across various assets
Rationale: Diversification reduces risk by allocating investments across different
assets to minimize the impact of any single investment's poor performance.
8. Which financial statement shows a company's financial position at a specific point
in time?
o A) Income statement
o B) Cash flow statement
o C) Balance sheet
o D) Statement of retained earnings
o Answer: C) Balance sheet
Rationale: The balance sheet presents the company's assets, liabilities, and
shareholders' equity at a specific date.
9. What is the primary function of the stock market?
o A) To set interest rates
o B) To facilitate the buying and selling of securities
o C) To regulate corporate taxes
o D) To provide loans to businesses
o Answer: B) To facilitate the buying and selling of securities
Rationale: The stock market enables companies to raise capital by issuing shares
and provides investors with a platform to buy and sell those shares.
10. Which of the following is an example of systematic risk?
o A) A company’s management failure
o B) A natural disaster affecting a specific industry
o C) Changes in interest rates
o D) A product recall
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