Finance Chapter One: Overview of Finance

Angie Koslowski
Quiz by Angie Koslowski, updated more than 1 year ago
Angie Koslowski
Created by Angie Koslowski about 6 years ago
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Quiz on Finance Chapter One: Overview of Finance, created by Angie Koslowski on 09/26/2015.

Resource summary

Question 1

Question
The main goal of the financial manager is to increase the firm's overall profits
Answer
  • True
  • False

Question 2

Question
In a corporation, profits are generally measured in terms of earnings per share
Answer
  • True
  • False

Question 3

Question
There is a positive correlation that exists between risk and return. The higher the risk of an investment, the higher the required return will be on that investment.
Answer
  • True
  • False

Question 4

Question
A firm's earnings are a true representation of cash flows available to the stockholders
Answer
  • True
  • False

Question 5

Question
Agency costs are fees that are paid by the management of a corporation to compensate any investor that feels that they have suffered a loss due to the agency problem.
Answer
  • True
  • False

Question 6

Question
Because of tax benefits, financial managers prefer cash flows later rather than sooner
Answer
  • True
  • False

Question 7

Question
The ethical behavior of the financial manager has a substantial impact on the shareholder's wealth maximization concept
Answer
  • True
  • False

Question 8

Question
Information asymmetry means that all market participants have exactly the same information set with which to make decisions.
Answer
  • True
  • False

Question 9

Question
The best deals in the market will go to the first investor who can recognize them and act on them
Answer
  • True
  • False

Question 10

Question
The required rate of return is what you think you will get
Answer
  • True
  • False

Question 11

Question
Which of the following is not one of the primary activities of the financial manager?
Answer
  • Making financing decisions
  • Prepare financial statements
  • Make investment decisions
  • Perform financial analysis

Question 12

Question
The main goal of the financial manager is to
Answer
  • maximize profit
  • maximize shareholder wealth
  • minimize costs

Question 13

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___________ can be defined as the art and science of managing money
Answer
  • economics
  • finance
  • accounting
  • banking

Question 14

Question
When the risk of an investment is high, the rate of return required by the investor will be
Answer
  • moderate
  • high
  • low
  • equal to a 30 day T-bill

Question 15

Question
The wealth of the shareholders of a corporation is represented by
Answer
  • price of stock
  • earnings per share
  • profits
  • cash flows

Question 16

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If the managers of a company are not the owners of the company, they are considered
Answer
  • directors
  • shareholders
  • insiders
  • agents

Question 17

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Agency costs pose the biggest problem for
Answer
  • directors
  • shareholders
  • insiders
  • agents

Question 18

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The largest provider of funds in the financial system is
Answer
  • individuals
  • businesses
  • government agencies
  • Bill Gates

Question 19

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Investments, markets and institutions, and corporate finance are
Answer
  • not related
  • closely related
  • only moderately related
  • not normally thought of as "finance"

Question 20

Question
The problem with profit maximization is that it is
Answer
  • short sighted
  • ignores risk
  • ignores timing of cash flows
  • all of the above
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