FM 1

The goal of the firm should be:

• Maximization of profits.

• Maximization of shareholder wealth.

• Maximization of consumer satisfaction.

• Maximization of sales.

"Shareholder wealth" in a firm is represented by:

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

• 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 long-run objective of financial management is to:

• maximize return on investment.

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

• maximize earnings per share.

• maximize market share.

Financing decisions are answers to questions:

• What specific assets should be acquired?

• What is the optimal firm size?

• What assets should be eliminated?

• What is the best dividend policy?

Investment decisions are answers to questions:

• What is the best dividend policy?

• What is the best type of financing?

• What is the best financing mix?

• What is the optimal firm size?

A market where new securities are bought and sold for the first time is:

• Primary Market

• Money Market

• Capital Market

• Secondary Market

A market for existing (used) securities rather than new issues is:

• Primary Market

• Capital Market

• Capital Market

• Secondary Market

You are about to determine your corporation’s taxable income. Which of the below would not be included as a tax-deductible expense?

• Depreciation expense

• Cost of goods sold

• Dividend expense

• Marketing expenses

Which of the following is not the responsibility of financial management?

• obtaining the best mix of financing alternatives

• preparation of the firm's accounting statements

• allocation of funds to current and capital assets

• development of an appropriate dividend policy

Money markets are markets for

• Consumer automobile loans

• Short-term debt securities.

• Foreign stocks.

• U.S. stocks.