1. "Shareholder wealth" in a firm is represented by what?

Share price

2. The focal point of financial management in a firm is:

A. The number and types of products or services provided by the firm
B. The minimization of the amount of taxes paid by the firm.
C. The creation of value for shareholders.
D. The dollars profits earned by the firm.

3. What are two main types of decisions taken by the finance manger? Financing and investment

4. A(n)          would be an example of a principal, while a(n)          would be an example of an agent.
A. Manager; accountant
B. Shareholder; manager
C. Manager; owner

5. Which of the following is NOT a function of financial management:

A.  Deciding the best sources of finance.
B. Spending money on capital expansion
C. Preparation of Tax Returns
D. Evaluating how much dividends to pay shareholders.

6. A partnership is an arrangement where more than one sole proprietorships (known as partners) agree to
cooperate to advance their mutual interests.
A. True
B. False

7. The main objective of the finance manger is to maximize the shareholders’ wealth
A. True
B. False

8. Both CEO and CFO are middle management level

A. True
B. False
9. Which of the following legal forms of organization is most expensive to organize?

A) sole proprietorships

B) partnerships

C) corporations

D) limited partnership

10. 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

D) the art of merchandising products and services

11. Which of the following statements is correct?

A. One drawback of forming a corporation is that it subjects the firm to additional regulations.
B. One drawback of forming a corporation is that it subjects the firm to limited liability.
C. One drawback of forming a corporation is that it makes it more difficult for the firm to raise capital.
D. All of the answers above are correct.

12. The three types of business entities are:

A. Proprietorships, small businesses, and partnerships.
B. Proprietorships, partnerships, and corporations.
C. Proprietorships, partnerships, and large businesses.
D. Financial, manufacturing, and service companies.

13. 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

14. In which forms of business organization are the owners personally liable for all the debts of the business?
 
A. Proprietorships and partnerships.
B. Proprietorships and corporations.
C. partnerships and corporations.

15. The wealth of corporate owners is measured by the share price of the stock

A. True

B. False

16. Agency costs are ________.

A) costs that managers bear when they do not act in the interests of shareholders

B) costs that firms must pay to comply with the regulations imposed by federal government agencies

C) costs that are exempt from taxation

D) costs that shareholders bear because managers pursue their own interests rather than acting in the
interests of shareholders