Chapter One
Financial Economics
This chapter contains 48 multiple choice questions, 20 short problems and 5 longer problems.
Multiple Choice
1.The primary goal of corporate management is to ________ shareholder wealth.
(a)minimize
(b)maximize
lonely god(c)leverage
(d)mitigate
Answer: (b)
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2.A ________ stock market impos ________ discipline on managers to take actions to maximize the market value of the firm’s shares.
(a)competitive, strong
(b)disperd, weakcard phone
(c)mature, no
(d)disperd, strong
Answer: (a)
3. The ________ form is especially well suited to the paration of ownership and management of firms becau it allows relatively frequent changes in owners by share transfer without affecting the operations of the firm.
(a)corporate
(b)sole proprietorship
(c)partnership
(d)houhold
Answer: (a)
4. ________ is anything that has economic value.
(a)A partnership
(b)An ast
(c)A balance sheet
(d)An income statement
Answer: (b)
5. A houhold’s wealth or net worth is measured by the value of its ________ minus its ________.
(a)liabilities; asts
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(b)asts; liabilities
(c)stocks; bonds
(d)bonds; liabilities
Answer: (b)
6. The branch of finance dealing with financial decisions of firms is called ________ or ________.
(a)investments; international finance
(b)markets; institutions
(c)business finance; institutions
(d)business finance; corporate finance
Answer: (d)
7. Bonds promi ________ cash payments, while stocks pay the ________ value left over after all other claimants have been paid.
(a)variable; residual
(b)residual; fixed
(c)fixed; residual
(d)fixed; variable
Answer: (c)
8. The day-to-day financial affairs of the firm are usually referred to as ________.
(a)trishworking capital management
(b)capital structure
(c)capital budgeting
(d)strategic planning
Answer: (a)
9. A disadvantage of the sole proprietorship is the fact that the sole proprietor has ________.
(a)limited liability for the debts of the firm
banabana(b)unlimited liability for the debts of the firm
(c)expensive costs to establish the firm
(d)limited authority over the day-to-day business decisions of the firm
Answer: (b)
10. In the U.S. corporations with concentrated ownership are called ________ and corporations with broadly disperd ownership are called ________.
(a)private corporations; public corporations
(b)public corporations; private corporations
(c)public corporations; monopolies
(d)private corporations; state owned corporations
Answer: (a)
11. Billy owns a hou worth $350,000 and has a $55,000 bank account. Billy owes $270,000 to the bank on a home mortgage loan and has a $12,000 credit card debt outstanding. Calculate Billy’s net worth.
(a)$135,000
(b)$123,000
(c)$497,000
(d)$37,000
Answer: (b)
12. Marlowe owns a hou worth $150,000, a car worth $25,000 and has an $18,000 bank account. Marlowe owes $135,000 to the bank on a home mortgage loan, $18,000 on the car loan and has an $18,000 credit card debt outstanding. Calculate Marlowe’s net worth.
(a)$58,000
(b)$123,000
(c)$22,000
(d)$37,000
Answer: (c)
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13. An advantage of the corporate form of ownership is ________.
(a)no liability
(b)unlimited liability
(c)limited liability
(d)CEO liability
Answer: (c)
14. In the corporate form, the parated structure creates the potential for ________ between owners and managers.
(a)服装订单a conflict of interest
(b)incread transactional costs
(c)stability in relations
(d)none of the above
Answer: (a)
15. All of the following are reasons for having a paration of management and ownership of the firm except:
(a)the “going concern” effect favors the parated structure
briton(b)professional managers may be found who posss a superior ability to run the business
(c)it prevents the possibility of a conflict of interest between the owners and management
(d)it allows for savings in the cost of information gathering
Answer: (c)
16. ________ involves the evaluation of costs and benefits spread out over time, and it is largely a financial decision-making process.
(a)Stock valuation
(b)Bond valuation
(c)Inventory costing
(d)紧张英文Strategic planning
Answer: (d)
17. Shareholder wealth maximization depends on all of the following except:
(a)production technology
(b)market interest rates
(c)risk aversion
(d)market risk premiums
Answer: (c)
18. A problem with using the profit maximization criterion is ________.
(a)deciding which period’s profit is to be maximized
(b)the definition of “maximize profits” is ambiguous
(c)the failure to consider risk