Special Quiz in Special Topics on FM

The goal of the firm should be:

• maximization of profits

• maximization of shareholder wealth

• maximization of consumer satisfaction

• maximization of sales

Which of the following best describes the goal of the firm?

• The maximization of the total market value of the firm's common stock

• Profit maximization

• Risk minimization

• None of the above

If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should:

• positively affect profits.

• increase the market value of the firm's common stock.

• either increase or have no effect on the value of the firm's common stock.

• accomplish all of the above

Financial management is concerned with which of the following?

• Creating economic wealth

• Making investment decisions that optimize economic value

• Making business decisions that optimize economic wealth

• All of the above

If one security has a greater risk than another security, how will investors respond?

• They will require a lower rate of return for the investment that has greater risk.

• They would be indifferent regarding their expectation of rates of return for either investment.

• They will require a higher rate of return for the investment that has greater risk.

• None of the above

If an investor had a choice of receiving Php1,000 today, or Php1,000 in five years, which would the average investor prefer?

• Php1,000 in five years because they are not good at saving money.

• Php1,000 today because it will be worth more than Php1,000 received in five years.

• Php1,000 in five years because it will be worth more than Php1,000 received today.

• Investors would be indifferent to when they would receive the Php1,000.

Why do investors prefer receiving cash sooner rather than later, according to finance theory?

• Incremental profits are greater than accounting profits.

• Money received earlier can be reinvested and returns can be increased.

• Tax considerations are important when investing.

• Diversification leads to increased value.

Which of the following is a type of long-term financing?

• Trade credit

• Bank overdraft

• Bonds

• Accounts payable

The time value of money concept suggests that:

• A dollar today is worth more than a dollar tomorrow

• A dollar today is worth less than a dollar tomorrow

• Future cash flows are irrelevant

• Inflation has no impact on financial decisions

Which of the following is NOT typically a factor in determining the weighted average cost of capital (WACC)?

• Cost of equity

• Cost of debt

• Market value of equity

• Retained earnings