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CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #9
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CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #9
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CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #9The primary objective of the firm is:
A. Shareholder wealth maximization
B. Social responsibility
C. Long run survival
D. Profit maximization - correct answer Shareholder wealth maximization
Agency costs include all of the following except:
A. Expenditures to monitor management's actions
B. Providing stock as part of management's compensation
C. Flotation costs
D. Bonding expenditures - correct answer flotation costs
Agency problems may give rise to costs that ______ the market value of firms.
A. Increase
B. Decrease
C. Do not affect
D. Are not important to - correct answer decrease
According to the shareholder wealth maximization goal, management should seek to
maximize the __________ of the __________ to owners.
A. Present value; expected pretax cash flows
B. Future value; expected pretax cash flows
C. Present value; expected future returns
D. Future value; expected future returns - correct answer present value; expected future
returns
Shareholder wealth is measured by the __________.
A. Book value of the shareholders' common stock holdings
B. Market value of the shareholders' common stock holdings
C. Book value of the company's assets
D. Market value of the company's assets - correct answer market value of the
shareholders' common stock holdings
Which of the following is not an advantage that the corporate form of business has over
either the sole proprietorship or partnership?
A. Ability to raise capital
B. Ease of changing ownership
C. Limited liability
, D. Elimination of double taxes - correct answer elimination of double taxes
The following are listed security exchanges in the United Sates:
A. New York Stock Exchange
B. Pacific Exchange
C. Cincinnati Exchange
D. All the above are listed exchanges - correct answer New York Stock Exchange
Pacific Exchange
Cincinnati Exchange
Financial intermediaries include
A. Securities brokers
B. Commercial banks
C. Securities dealers
D. All of the above - correct answer commercial banks
______ markets deal in short-term securities having maturities of one year or less.
A. Credit
B. Money
C. Capital
D. Capital and credit - correct answer Money
Financial intermediaries
A. Issue secondary claims to the lender
B. Are compensated for their services by fixed fees
C. Include both brokers and dealers
D. Issue primary claims to the lender - correct answer issue secondary claims to the
lender
The fact that no investor can expect to earn excess returns based on an investment
strategy using only historical stock price or return information is an example of________
market efficiency.
A. Strong-form
B. Weak-form
C. Semiweak-form
D. Semistrong-form - correct answer weak-form
In an efficient capital market, corporate diversification is ________.
A. Unnecessary
B. Inexpensive
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