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

• financial markets.

• private company

• financial reports

• 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 risk.

• maximizing profit.

• maximizing wealth.

• minimizing return.

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

• financial market

• money market

• stock market

• capital market

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

Which of the following is NOT a financial institution?

• A commercial bank.

• An insurance company.

• A pension fund.

• A newspaper publisher.

A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.

Asset     Year 1                  Year 2                  Year 3

1             $ 21,000              $ 15,000              $ 6,000

2             $ 9,000                $ 15,000              $ 21,000

3             $ 3,000                $ 20,000              $ 19,000

4             $ 22,000                $ 12,000              $ 12,000

Based on the profit maximization goal, the financial manager would choose _____.

• Asset 1.

• Asset 2.

• Asset 3.

• Asset 4.

The capital 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