Financial Management: Chapter 1 Questions

Agency problems are most associated with?

Corporations

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

An increase in the market value per share

Financial managers should strive to maximize the current value per share of the existing stock to:

Best represent the interests of the current shareholders

Which one of the following questions is a working capital management decision?

How much inventory should be on hand for immediate sale

The decision to issue additional shares of stock is an example of:

A capital structure decision

Which one of the following terms is defined as the management of a firm's long-term investments?

Capital Budgeting

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital Structure

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

Capital structure decisions include determining?

How much debt should be assumed to fund a project

Decisions made by financial managers should primarily focus on increasing the:

Market value per share of outstanding stock

Which one of the following best states the primary goal of financial management?

Maximize the current value per share

Financial managers should primarily focus on the interests of?

Shareholders

Which one of the following parties has ultimate control of corporation?

Shareholders

Working capital management decisions include determining?

The minimum level of cash to be kept in a checking account

An example of a capital budgeting decision is deciding?

Whether or not to purchase a new machine for the production line