Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank
D) the art of merchandising products and services
Answer: C
Diff: 1
Topic: What is Finance?
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
25) In March 2017, Amazon and Clorox reported nearly identical earnings per share, but the stock price of Amazon was more than six times higher than the Clorox stock price. The most likely explanation for that difference is that ________.
A) Clorox is bad for the environment
B) Amazon is a riskier company
C) investors see better long-term prospects for Amazon
D) Amazon has more shares of stock outstanding
Answer: C
Diff: 1
Topic: Managing the Firm
Learning Obj.: LG 4
Learning Outcome: F-01
AACSB: Analytical Thinking
26) The wealth of corporate owners is measured by the share price of the stock.
Answer: TRUE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Analytical Thinking
27) Risk, the magnitude and timing of cash flows are the key determinants of share price, which represent the wealth of the owners in the firm.
Answer: TRUE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Analytical Thinking
28) A higher earnings per share (EPS) does not necessarily translate into a higher stock price.
Answer: TRUE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Reflective Thinking
29) The profit maximization goal ignores the timing of returns, does not directly consider cash flows, and ignores risk.
Answer: TRUE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Reflective Thinking
30) When considering a firm's financial decision alternative, financial managers should accept only those actions that are expected to maximize shareholder value.
Answer: TRUE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Ethical Understanding and Reasoning
31) An increase in a firm's risk will always result in a higher share price since the stockholder must be compensated for the greater risk.
Answer: FALSE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Analytical Thinking
32) An objection to managing a firm on behalf of stakeholders rather than shareholders is that ________.
A) stakeholders have no economic interest in the firm
B) stakeholders have an interest only in short-term outcomes
C) there is no clear way to satisfy all stakeholders whose economic interests may be at odds with each other
D) the goal of managing on behalf of stakeholders is too narrow
Answer: C
Diff: 1
Topic: Finance and the firm
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
33) An effective ethics program ________.
A) can weaken corporate value
B) has no effect on a corporation's value
C) can enhance a corporation's value
D) will result in high employee attrition rate
Answer: C
Diff: 1
Topic: Ethics and Share Price
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Ethical Understanding and Reasoning
34) When considering a firm's financial decision alternative, financial managers should accept only those actions that are expected to increase the firm's profitability.
Answer: FALSE
Diff: 1
Topic: Maximize Shareholder Wealth
Learning Obj.: LG 3
Learning Outcome: F-01
AACSB: Ethical Understanding and Reasoning
35) ________ are the standards of conduct or moral judgment that apply to persons engaged in commerce.
A) Government regulations
B) The Uniform Commercial Codes
C) The rules of fair play
D) Business ethics
Answer: D
Diff: 1
Topic: Finance and the firm
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
36) Cash flows and risk are the key determinants in share price. Increased risk, other things remaining the same, results in ________.
A) a lower share price
B) a higher share price
C) an unchanged share price
D) an undetermined share price
Answer: A
Diff: 2