WorksheetsFFM: Chapter 1-An Overview of Financial Management
Total questions: 40
Worksheet time: 20mins
What is the primary goal of a publicly owned firm?
Maximize profits
Maximize market share
Minimize cost
Maximize stockholder wealth
Maximize sales
Intrinsic value refers to:
Current market price of the stock
Book value per share
Long-run true value of the stock
Dividend per share
Amount of retained earnings
Which of the following is NOT a form of business organization?
Proprietorship
Corporation
Limited Liability Partnership
General Insurance Corporation
Partnership
Which form of business organization has unlimited liability?
Corporation
LLC
Partnership
LLP
S Corporation
Which financial professional is responsible for capital budgeting?
COO
CEO
CFO
Controller
Treasurer
Which act requires CEOs and CFOs to certify financial statements?
Financial Modernization Act
Sarbanes–Oxley Act
Gramm-Leach-Bliley Act
Securities Act
Glass-Steagall Act
The term "marginal investor" refers to:
The largest shareholder
An insider trader
The investor whose views determine stock price
The least informed investor
The founder of the company
What separates finance from accounting?
Finance is focused on history
Accounting is broader
Finance uses accounting data to make decisions
Accounting forecasts future outcomes
None of the above
Capital markets are primarily concerned with:
Product pricing
Manufacturing decisions
Determining interest rates and security prices
Employee management
Marketing
Which job is NOT typically related to finance?
Portfolio manager
Investment banker
Credit analyst
Civil engineer
Corporate treasurer
Stock price equilibrium exists when:
Intrinsic value is less than market price
Market price is stable over a week
Market price equals intrinsic value
No new information is released
Short interest is low
What type of investor analyzes intrinsic value?
Retail investor
Day trader
Technical analyst
Security analyst
Arbitrageur
What is an S Corporation?
A nonprofit organization
A publicly listed firm
A corporation taxed like a partnership
A government-controlled firm
A subsidiary
Which stakeholder group is most concerned with coupon payments?
Stockholders
Employees
Debtholders
Customers
Suppliers
Hostile takeovers are usually aimed at companies:
With declining revenues
That are overvalued
Whose managers are underperforming
In the tech sector
That are non-profits
What is a corporate raider?
A regulator
A short seller
An investor aiming to replace management
A credit rating agency
A retail shareholder
Which of the following enhances manager-shareholder alignment?
Salary bonuses
Stock options
More vacation
Office perks
Club memberships
What conflict arises due to leverage?
Stockholder-bondholder conflict
Manager-customer conflict
Shareholder-employee conflict
Supplier-creditor conflict
CEO-Board conflict
A key tool for direct stockholder intervention is:
Social media
Proxy voting
Subsidies
Corporate espionage
Legislation
What is the main advantage of a corporation?
Lower taxes
Less regulation
Limited liability
More secrecy
Fewer meetings
Which concept assumes rational investment behavior?
Accounting
Market pricing
Finance
Regulation
Marketing
Finance is closely related to:
Sociology
Accounting and economics
Political science
Ethics only
Law only
Ethical behavior in finance helps avoid:
Inflation
Currency fluctuations
Lawsuits and regulatory penalties
Marketing failures
New product failures
A defined contribution plan:
Guarantees retirement income
Is managed by the government
Puts investment responsibility on employees
Is risk-free
Is illegal in some states
The CFO is NOT responsible for:
Capital budgeting
Legal compliance
Sales forecasting
Treasury functions
Investor relations
What is true of intrinsic value?
It is always equal to market value
It is set by the government
It is estimated based on expected cash flows
It is never used in valuation
It is irrelevant in finance
What factor does NOT affect a firm’s value?
Customer preferences
Managerial decisions
The economy
Political climate
Sports team affiliations
Which term describes a situation where managers act against shareholders’ interests?
Hostile takeover
Agency problem
Regulation failure
Ethical compliance
Equilibrium
Which organization type is most common for large businesses?
Proprietorship
Partnership
Corporation
LLC
S Corporation
Who certifies the accuracy of financial statements under SOX?
SEC
Board of Directors
Internal Auditor
CEO and CFO
CPA Firm
What is the major disadvantage of a partnership?
Taxation
Regulation
Unlimited liability
Access to capital
Ownership transferability
Which of the following increases the likelihood of unethical behavior?
Transparent compensation plans
Proper regulation
Poorly designed incentive structures
Government oversight
Academic education
Which value is observable and reported daily?
Book value
Intrinsic value
Market price
Par value
Retained earnings
In which form of business is it easiest to raise large capital?
Proprietorship
Partnership
Corporation
LLC
None of the above
Which entity regulates securities trading?
Federal Reserve
Department of Commerce
Securities and Exchange Commission
Treasury Department
IRS
What is the consequence of a short-run focus by managers?
Better long-term strategy
Lower stock volatility
Reduced firm value
Higher employee morale
Increased intrinsic value
Who ultimately elects a corporation’s CEO?
Investors
Board of Directors
CFO
Shareholders directly
Company lawyer
Which of the following is a form of direct investor protection?
Sarbanes–Oxley certification
Intrinsic valuation
Market pricing
Proxy fights
Public relations
Financial management decisions include:
Hiring and firing decisions
Product design
Asset acquisition and financing
Legal interpretations
Manufacturing optimization
Ethics programs in business aim to:
Increase productivity
Reduce marketing costs
Promote moral behavior and avoid legal issues
Minimize shareholder meetings
Impress regulators
