Finance HW Ch. 1

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict.

The primary goal of financial management is most associated with increasing the:

market value of the firm.

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment

Which one of the following is most apt to align management's priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for a minimum of three years

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis.

The goal of financial management is to increase the:

current market value per share.

A corporation:

is a legal entity separate from its owners.

When conducting a financial analysis of a firm, financial analysts:

frequently use accounting information.

The issuer of a security must be involved in all _____ transactions involving that security.

primary market

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

The primary goal of financial management is to maximize:

the market value of existing stock.