Mcqs on Introduction to business finance

	__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.   Financial management Profit maximization Agency theory Social responsibility
	Financial management

	Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored.   principals; agents; agents agents; principals; principals principals; agents; principals agents; principals; agents
	principals; agents; agents

	__________ is concerned with the maximization of a firm's earnings after taxes.   Shareholder wealth maximization Profit maximization Stakeholder maximization EPS maximization
	Profit maximization

	What is the most appropriate goal of the firm?   Shareholder wealth maximization. Profit maximization. Stakeholder maximization. EPS maximization.
	Shareholder wealth maximization.

	Which of the following statements is correct regarding profit maximization as the primary goal of the firm?   Profit maximization considers the firm's risk level. Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits. Profit maximization does consider the impact on individual shareholder's EPS. Profit maximization is concerned more with maximizing net income than the stock price.

Profit maximization is concerned more with maximizing net income than the stock price.

	__________ is concerned with the branch of economics relating the behavior of principals and their agents.   Financial management Profit maximization Agency theory Social responsibility
	Agency theory

	A concept that implies that the firm should consider issues such as protecting the consumer, paying fair wages, maintaining fair hiring practices, supporting education, and considering environmental issues.   Financial management Profit maximization Agency theory Social responsibility
	Social responsibility

	Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?   Budgets and forecasts Asset management Investment management Financing management
	Budgets and forecasts

	The __________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.   asset management financing investment capital budgeting
	financing

	To whom does the Treasurer most likely report?   Chief Financial Officer. Vice President of Operations. Chief Executive Officer. Board of Directors.
	Chief Financial Officer.

	The authors of your textbook suggest that you need to understand financial management even if you have no intention of becoming a financial manager. One reason is that the successful manager of the not-too-distant future will need to be much more of a __________ who has the knowledge and ability to move not just vertically within an organization but horizontally as well. Developing __________ will be the rule, not the exception.   specialist; specialties generalist; general business skills technician; quantitative skills team player; cross-functional capabilities
	team player; cross-functional capabilities

	The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.   asset management financing investment accounting
	investment

	How are earnings per share calculated?   Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value. Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding. Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding. Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value.

Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.

	According to the text's authors, what is the most important of the three financial management decisions?   Asset management decision. Financing decision. Investment decision. Accounting decision.
	Investment decision.

	The __________ decision involves efficiently managing the assets on the balance sheet on a day-to-day basis, especially current assets.   asset management financing investment accounting
	asset management

	Which of the following is not a perquisite (perk)?   Company-provided automobile. Expensive office. Salary. Country club membership.
	Salary.

	Which of the following is not normally a responsibility of the controller of the modern corporation?   Budgets and forecasts. Asset management. Financial reporting to the IRS. Cost accounting.
	Asset management

	All constituencies with a stake in the fortunes of the company are known as __________.   shareholders stakeholders creditors customers
	stakeholders

	Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?   EPS maximization ignores the firm's risk level. EPS maximization does not specify the timing or duration of expected EPS. EPS maximization naturally requires all earnings to be retained. EPS maximization is concerned with maximizing net income.
	EPS maximization is concerned with maximizing net income.

	__________ is concerned with the maximization of a firm's stock price.   Shareholder wealth maximization Profit maximization Stakeholder welfare maximization EPS maximization
	Shareholder wealth maximization

	Corporate governance success includes three key groups. Which of the following represents these three groups?   Suppliers, managers, and customers. Board of Directors, executive officers, and common shareholders. Suppliers, employees, and customers. Common shareholders, managers, and employees.
	Board of Directors, executive officers, and common shareholders.