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

Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
37) Cash flows and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.
A) a lower share price
B) a higher share price
C) an unchanged share price
D) an undetermined share price
Answer:  B
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 

1.2   Managing the firm.
 
1) A treasurer is responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting.
Answer:  FALSE
Diff: 1
Topic:  Legal Forms of Business Organization
Learning Obj.:  LG 2
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
2) ________ decisions focus on how a company will spend its financial resources on long-term projects that ultimately determine whether the firm successfully creates value for its owners.
A) Investment
B) Financing
C) Working capital
D) Risk management
Answer:  A
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
3) The principle of the time value of money basically says that ________.
A) because firms pay managers a great deal, managers need to use their time very effectively
B) money received today is more valuable than money received in the future because money in the future is more risky
C) money received today is more valuable than money received in the future because firms and individuals can invest money they have today and earn a return on that money
D) because of the principal-agent problem, investors cannot trust that money firms promise to pay in the future will ever arrive
Answer:  B
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
4) The primary principle that finance borrows from economics is ________.
A) generally accepted accounting principles
B) cash is king
C) marginal cost-benefit analysis
D) shareholder value maximization
Answer:  C
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
5) Financing decisions deal with the left-hand side of the firm's balance sheet.
Answer:  FALSE
Diff: 1
Topic:  Primary Activities of the Financial Manager
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
6) Which of the following activities of a finance manager determines the types of assets the firm holds?
A) budget allocation
B) investment decisions
C) financing decisions
D) analyzing and planning cash flows
Answer:  B
Diff: 1
Topic:  Primary Activities of the Financial Manager
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
7) You own a building supply store. Today you sold construction materials to a contractor for $10,000 that you acquired a week ago for $8,000.  You paid for the materials in cash, but you sold them to the contractor on credit, and you expect him to pay his bill in a few months.  Based on this information during the week you earned a positive profit but experienced a negative cash flow.
Answer:  TRUE
Diff: 2
Topic:  Managing the Firm
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
8) There is a tendency for CEOs of larger companies to earn more money than CEOs of smaller companies. Suppose a CEO decides to acquire another company, thus increasing the size of the CEO's firm. Suppose also that the price of the stock of the acquiring firm falls when it learns of the upcoming acquisition. This appears to be an example of ________.
A) a CEO pursuing profit maximization rather than wealth maximization
B) the principal-agent problem
C) a CEO behaving unethically
D) the general principal that acquisitions are generally not good investments
Answer:  B
Diff: 2
Topic:  Managing the Firm
Learning Obj.:  LG 6
Learning Outcome:  F-01
AACSB:  Reflective Thinking
 

9) A corporation's stockholders elect its CEO.
Answer:  FALSE
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 3