Chapter 1 (FINANCIAL MANAGEMENT)

"Shareholder wealth" in a firm is represented by:

• the number of people employed in the firm.

• the book value of the firm's assets less the book value of its liabilities.

• the amount of salary paid to its employees.

• the market price per share of the firm's common stock.

The long-run objective of financial management is to:

• maximize earnings per share.

• maximize the value of the firm's common stock.

• maximize return on investment.

• maximize market share.

The market price of a share of common stock is determined by:

• the board of directors of the firm.

• the stock exchange on which the stock is listed.

• the president of the company.

• individuals buying and selling the stock.

What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?

• $100,000

• $6.00

• $0.50

• $6.50

A(n) would be an example of a principal, while a(n) would be an example of an agent.

• shareholder; manager

• manager; owner

• accountant; bondholder

• shareholder; bondholder

The focal point of financial management in a firm is:

• the number and types of products or services provided by the firm.

• the minimization of the amount of taxes paid by the firm.

• the creation of value for shareholders.

• the dollars profits earned by the firm.

The decision function of financial management can be broken down into the decisions.

• financing and investment

• investment, financing, and asset management

• financing and dividend

• capital budgeting, cash management, and credit management

The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily related to .

• operational; financial management

• financial management; accounting

• accounting; financial management

• financial management; operations

A company's is (are) potentially the most effective instrument of good corporate governance.

• common stock shareholders

• board of directors

• top executive officers

• None of them

Michael Cohn is a "member" (a type of owner) of a marine supply business. Michael's business is:

• a sole proprietorship.

• a corporation.

• a limited liability company

• a general partnership.