WorksheetsIntroduction to Financial Management
Total questions: 15
Worksheet time: 8mins
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 3-year period as described below:
Asset 1: Year 1 - $21,000 ; Year 2 - $15,000 ; Year 3 - $6,000
Asset 2: Year 1 - $9,000 ; Year 2 - $15,000 ; Year 3 - $21,000
Asset 3: Year 1 - $3,000 ; Year 2 - $20,000 ; Year 3 - $19,000
Asset 4: Year 1 - $6,000 ; Year 2 - $12,000 ; Year 3 - $12,000
Which asset would the financial manager choose?
Asset 1
Asset 2
Asset 3
Asset 4
When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firms profitability.
True
False
Wealth maximization as the goal of the firm implies enhancing the wealth of
the Board of Directors.
the firm's employees.
the government.
the firm's shareholders.
These are the factors that influence market price of the corporation's stocks which are controllable by management, EXCEPT:
dividends
competent management
profitability
macroeconomic conditions
The highest policy making body in a corporation.
Shareholders
Board of Directors
Chief Executive Officer
President
The following are among the responsibilities of VP for Administration, EXCEPT:
Coordinating functions of finance and marketing departments.
Providing assistance in payroll preparation, payment of vendors, and collection of receivables.
Identifying adequate and cheap raw material suppliers.
Assisting other departments in hiring employees.
The role of the VP for Finance is to determine the appropriate capital structure of the company.
True
False
This is one of the functions of a Financial Manager which include making decisions on how to fund long term investment and working capital.
Financing
Investing
Operating
Dividend policies
Intermediaries that channel the savings of individuals, businesses, and government into loans of investment.
Private Placements
Financial Institutions
Public Offering
Financial Market
The key participants in financial transactions are individuals, businesses, and government. Individuals are net ___ of funds, and businesses are net ___ of funds.
suppliers; users
purchasers; sellers
users;suppliers
users; providers
It is possible that the company has profits but its cash flow is negative.
True
False
The Chief Executive Officer approves the company's strategies, goals, and budgets.
True
False
Short term sources of funds are those that will mature in at most 12 months and the interest is generally lower as compared to that of long term sources. Hence, this would lead to a lower financing cost.
True
False
Dividends are paid by corporations to existing shareholders based on their shareholdings in the company as a return on their investment.
True
False
The primary objective of financial management is
minimizing risk.
maximizing profit.
maximizing wealth.
minimizing return.
