Financial Management Principles and Applications 8th Edition By Sheridan Titman test bank

Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: A
The goal of the firm should be the maximisation of profit.
True
False
Difficulty: Basic
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: B
One of the problems associated with profit maximisation is that it ignores the timing of a project’s return.
True
False
Difficulty: Moderate
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: A
The goal of profit maximisation is equivalent to the goal of maximisation of share value.
True
False
Difficulty: Basic
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: B
The goal of profit maximisation ignores the timing of profit.
True
False
Difficulty: Moderate
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: A
The goal of maximising shareholder wealth inevitably conflicts with socially responsible behaviour on the part of corporations.
True
False
Difficulty: Moderate
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: B
Unethical insider trading by government officials inspired both the Sarbanes–Oxley Act and CLERP 9.
True
False
Difficulty: Moderate
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: B
A reputation for unethical behaviour can negatively affect the value of a company’s shares.
True
False
Difficulty: Basic
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: A
Essay: Write your answer in the space provided or on a separate sheet of paper
Who was Alan Bond? What lessons does his story offer business entrepreneurs?
Difficulty: Complex
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: Bond was best known as the bankroller of Australia’s victory in the 1983 America’s Cup. He is the founder of Bond University. He built a multi-billion dollar fortune and headed a network of complex businesses and financial relationships. As a result of the mountain of debt instigated by the stock-market crash of 1987, Bond resorted to more and more questionable actions to keep his ship afloat. His business career should serve as a salient lesson to high-flying business entrepreneurs the world over, in three important respects: (1) business empires based on debt-funded acquisitions during times of rapidly
rising asset prices tend to be highly vulnerable when prices start to fall; (2) it is at times of greatest stress,
pressure and desperation that many of us are most at risk of immoral, unethical or even criminal behaviour; and (3) as soon as one feels compelled to hide the truth about a business transaction from colleagues, shareholders and regulators, that should serve as a warning that even tougher times lie ahead.
Briefly discuss the incentives for financial managers to conduct their business in an ethical manner.
Difficulty: Moderate
AACSB: 6. Reflective thinking
Learning Objective: 1.3 Understand the role of the financial manager within the firm and the goal for making financial choices
Answer: Unethical behaviour destroys trust, and businesses cannot function without a certain degree of trust. Extreme ethical lapses such as those evident in the Madoff Ponzi scheme may also break laws and result in fines or imprisonment. In less extreme cases, deceptive accounting practices or sales techniques once exposed lead to a loss of trust. Because individuals and firms are reluctant to do business with those they mistrust, a reputation for unethical behaviour over the long run leads to adversarial relations with business partners, a loss of customers and destruction of the firm’s value.
Multiple choice: Choose the one alternative that best completes the statement or answers the question
Consider the following equally likely project outcomes:
 
Profit

 
X
Y