Business Finance- Review

To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return.

• True

• False

Dividend payments change directly with changes in earnings per share.

• True

• False

The wealth of corporate owners is measured by the share price of the stock.

• True

• False

Financial markets are intermediaries that channel the savings of individuals, businesses, and government into loans or investments.

• True

• False

The money market involves trading of securities with maturities of one year or less while the capital market involves the buying and selling of securities with maturities of more than one year.

• True

• False

The ______ is created by a financial relationship between suppliers and users of short-term funds.

• financial market

• money market

• capital market

• stock market

Firms that require funds from external sources can obtain them from _____.

• financial markets

• private placement

• financial institutions

• All of the above

The major securities traded in the capital markets are ____.

• stocks and bonds

• bonds and commercial paper

• commercial paper and Treasury bills

• Treasury bills and certificates of deposit

The primary goal of the financial manager is _____.

• minimizing return

• maximizing wealth

• maximizing profit

• minimizing risk

Wealth maximization as the goal of the firm implies enhancing the wealth of

• the Board of Directors

• the firm's employees

• the federal government

• the firm's stockholders