Chapter 1 DSM for Business Finance
Which of the following positions typically reports to the chief financial officer (CFO)?
CORRECT ANSWER: Controller
Which of the following is an example of an agency cost?
CORRECT ANSWER: Executive stock options
Which of the following is one of the primary functions of the financial manager?
CORRECT ANSWER: Making financing decisions
The U.S. Congress passed legislation in 2002 that holds corporate managers personally responsible for the firm's financial disclosures and decisions. This law is known as the __________.
CORRECT ANSWER: Sarbanes-Oxley Act
Which of the following is one of the primary questions addressed by financial managers?
CORRECT ANSWER: Which projects should the firm invest resources in to increase shareholder wealth?
One of the most fundamental principles in the field of finance is that money has __________ value.
CORRECT ANSWER: a time
If the managers of a company are not the owners of the company, they are considered:
CORRECT ANSWER: agents
When a firm has agency problems the stock price is often depressed which makes the firm:
CORRECT ANSWER: an attractive takeover candidate.
The process of evaluating long-term investment opportunities for the firm, and then determining which ones the firm should invest in is known as:
CORRECT ANSWER: capital budgeting
Financial managers are more concerned with a firm's __________ than a firm's earnings per share when evaluating a potential acquisition.
CORRECT ANSWER: cash flows go to explanation
A firm's chief accountant that is responsible for all accounting activities is known as the __________.
CORRECT ANSWER: controller
The set of rules, processes and laws that dictate how a firm is controlled, operated and regulated is known as __________.
CORRECT ANSWER: corporate governance
A __________ is a form of business organization that is considered an artificial being and has limited liability.
CORRECT ANSWER: corporation
The manager responsible for monitoring and managing the firm's exposure to loss from currency fluctuations is the:
CORRECT ANSWER: foreign exchange manager go to explanation
One of the basic premises in finance is that when the risk of an investment is high, the rate of return required by the investor will be:
CORRECT ANSWER: high
The market price of a share of stock is determined by:
CORRECT ANSWER: investors buying and selling the stock
A limited liability company combines the:
CORRECT ANSWER: limited liability of a corporation with the ownership of a partnership go to explanation
Financial managers should undertake investment opportunities when the __________.
CORRECT ANSWER: marginal benefit is greater than the marginal cost
The primary goal of the financial manager is to:
CORRECT ANSWER: maximize shareholder wealth
Capital structure refers to the:
CORRECT ANSWER: mix of the firm's long-term sources of financing
When a manager makes a poor decision that is not in the shareholders' best interest it will be:
CORRECT ANSWER: reflected in the stock price.
Financial managers __________ when making decisions because it can have a direct impact on shareholder wealth.
CORRECT ANSWER: should always engage in ethical behavior
A disadvantage of a partnership is __________.
CORRECT ANSWER: unlimited liability
One of the primary tasks of the financial manager is to manage short-term cash needs, which is known as:
CORRECT ANSWER: working capital management
The science and art of managing money is known as __________.
finance