Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank

Answer:  TRUE
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking

14) Which of the following is true of cash flows and risk?
A) Lower cash flow and lower risk result in an increase in share price.
B) Higher cash flow and lower risk result in an increase in share price.
C) Higher cash flow and higher risk result in an increase in share price.
D) Lower cash flow and higher risk result in an increase in share price.
Answer:  B
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
15) The goal of business ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice.
Answer:  TRUE
Diff: 1
Topic:  The Role of Business Ethics
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Ethical Understanding and Reasoning
 
16) The primary goal of a financial manager is ________.
A) minimizing risk
B) maximizing profit
C) maximizing wealth
D) minimizing return
Answer:  C
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
17) Corporate owners earn a return ________.
A) by realizing gains through increases in share price and interest earnings
B) by realizing gains through increases in share price and cash dividends
C) through capital appreciation and retained earnings
D) through interest earnings and earnings per share
Answer:  B
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking

18) The wealth of the owners of a corporation is represented by ________.
A) profits
B) earnings per share
C) share value
D) cash flow
Answer:  C
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
19) Wealth maximization as the goal of a firm implies enhancing the wealth of ________.
A) the auditors
B) the creditors
C) the federal reserve
D) the firm's stockholders
Answer:  D
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
20) The amount earned during the accounting period on each outstanding share of common stock is called ________.
A) dividend per share
B) earnings per share
C) net profits after taxes
D) book value per share
Answer:  B
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
21) Firm A generates more cash flow while taking less risk than Firm B.  The stock price of Firm A should be higher than the stock price of Firm B.
Answer:  TRUE
Diff: 2
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking

22) Which of the following is NOT a reason that a firm that maximizes profits may fail to maximize shareholder wealth.
A) The timing of profits matters. Shareholders might prefer lower profits that arrive sooner.
B) Risk matters. Shareholders are risk averse, so they prefer less risky investments that generate lower profits.
C) Shareholder wealth depends on cash flow which is not the same as profit.
D) If a firm maximizes profits by engaging in unethical business practices, it's stock price may be adversely affected.
Answer:  B
Diff: 2
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
23)  ________ pool investment capital, make risky investment decisions, and manage risky investments on behalf of investors who would otherwise not be able to do so own their own.
A) Firms
B) Stockholders
C) Stakeholders
D) Regulators
Answer:  A
Diff: 1
Topic:  Finance and the firm
Learning Obj.:  LG 1
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
24) Finance is ________.
A) the system of verifying, analyzing, and recording business transactions
B) the science of the production, distribution, and consumption of goods and services
C) the science and art of how individuals and businesses raise, allocate, and invest money