1. HomeStudent Resources Chapter 1 Multiple choicequestionsMultiple choice questionsTry the multiple choice questions below to test your knowledge of Chapter 1. Once you havecompleted the test, click on Submit Answers for Grading to get your results.If your lecturer has requested that you send your results to them, please complete the RoutingInformation found at the bottom of your graded page and click on the E-Mail Results button.Please DO NOT forward your results unless your lecturer has specifically requested that you doso.This activity contains 21 questions.__________ is concerned with the acquisition, financing, and management of assets with someoverall goal in mind.Financial managementProfit maximizationAgency theorySocial responsibilityJensen and Meckling showed that __________ can assure themselves that the __________ willmake optimal decisions only if appropriate incentives are given and only if the __________ aremonitored.principals; agents; agentsagents; principals; principalsprincipals; agents; principalsagents; principals; agents__________ is concerned with the maximization of a firms earnings after taxes.

2. Shareholder wealth maximizationProfit maximizationStakeholder maximizationEPS maximizationWhat is the most appropriate goal of the firm?Shareholder wealth maximization.Profit maximization.Stakeholder maximization.EPS maximization.Which of the following statements is correct regarding profit maximization as the primary goal ofthe firm?Profit maximization considers the firms risk level.Profit maximization will not lead to increasing short-term profits at the expense oflowering expected future profits.Profit maximization does consider the impact on individual shareholders EPS.Profit maximization is concerned more with maximizing net income than the stock price.__________ is concerned with the branch of economics relating the behavior of principals andtheir agents.Financial managementProfit maximizationAgency theorySocial responsibility 3. 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 consideringenvironmental issues.Financial managementProfit maximizationAgency theorySocial responsibilityWhich of the following is not normally a responsibility of the treasurer of the modern corporationbut rather the controller?Budgets and forecastsAsset managementInvestment managementFinancing managementThe __________ decision involves determining the appropriate make-up of the right-hand side ofthe balance sheet.asset managementfinancinginvestmentcapital budgetingTo whom does the Treasurer most likely report? 4. Chief Financial Officer.Vice President of Operations.Chief Executive Officer.Board of Directors.The authors of your textbook suggest that you need to understand financial management even ifyou have no intention of becoming a financial manager. One reason is that the successfulmanager of the not-too-distant future will need to be much more of a __________ who has theknowledge and ability to move not just vertically within an organization but horizontally as well.Developing __________ will be the rule, not the exception.specialist; specialtiesgeneralist; general business skillstechnician; quantitative skillsteam player; cross-functional capabilitiesThe __________ decision involves a determination of the total amount of assets needed, thecomposition of the assets, and whether any assets need to be reduced, eliminated, or replaced.asset managementfinancinginvestmentaccountingHow are earnings per share calculated?Use the income statement to determine earnings after taxes (net income) and divide bythe previous periods earnings after taxes. Then subtract 1 from the previously calculated value.Use the income statement to determine earnings after taxes (net income) and divide bythe number of common shares outstanding.Use the income statement to determine earnings after taxes (net income) and divide by 5. the number of common and preferred shares outstanding.Use the income statement to determine earnings after taxes (net income) and divide bythe forecasted periods earnings after taxes. Then subtract 1 from the previously calculated value.According to the texts authors, what is the most important of the three financial managementdecisions?Asset management decision.Financing decision.Investment decision.Accounting decision.The __________ decision involves efficiently managing the assets on the balance sheet on aday-to-day basis, especially current assets.asset managementfinancinginvestmentaccountingWhich of the following is not a perquisite (perk)?Company-provided automobile.Expensive office.Salary.Country club membership. 6. Which of the following is not normally a responsibility of the controller of the modern corporation?Budgets and forecasts.Asset management.Financial reporting to the IRS.Cost accounting.All constituencies with a stake in the fortunes of the company are known as __________.shareholdersstakeholderscreditorscustomersWhich of the following statements is not correct regarding earnings per share (EPS) maximizationas the primary goal of the firm?EPS maximization ignores the firms risk level.EPS maximization does not specify the timing or duration of expected EPS.EPS maximization naturally requires all earnings to be retained.EPS maximization is concerned with maximizing net income.__________ is concerned with the maximization of a firms stock price.Shareholder wealth maximizationProfit maximizationStakeholder welfare maximizationEPS maximization 7. Corporate governance success includes three key groups. Which of the following representsthese three groups? Suppliers, managers, and customers. Board of Directors, executive officers, and common shareholders. Suppliers, employees, and customers. Common shareholders, managers, and employees.Copyright 1995-2005 Pearson Education. All rights reserved.Legal and Privacy Notice