Question 1

The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

Accepted Answer

A) True 
 B)False

Question 2

Profits of sole proprietorships are taxed at corporate tax rates.

Accepted Answer

A) True 
 B)False

Question 3

What are the characteristics of a corporation?

Accepted Answer

A corporation is characterized by...

Question 4

Insider trading occurs when

Accepted Answer

A)   someone has information not available to the public, which they use to profit from trading in stocks.
B)   corporate officers buy stock in their company.
C)   lawyers, investment dealers, and others buy common stock in companies represented by their firms
D)   stock transactions occur with reduced brokerage fees.E) A) and B)
F) A) and C)

Question 5

Increased international competition can be seen as a motivator to emphasize

Accepted Answer

A)   asset diversification strategies.
B)   the risk side of the risk-return relationship.
C)   the return side of the risk-return relationship.
D)   None of the other answers are correctE) A) and D)
F) A) and C)

Question 6

Maximizing the earnings of the firm is the goal of financial management.

Accepted Answer

A) True 
 B)False

Question 7

The increase in the internationalization of financial markets has led to

Accepted Answer

A)   companies searching the global financial markets for low cost funds.
B)   an increase in Canadian companies listing on the New York Stock Exchange.
C)   an increase in debt obligations denominated in foreign currency on Canadian corporate balance sheets.
D)   all of the other answers are correctE) A) and B)
F) All of the above

Question 8

During the 1930s, the provincial government assumed a much greater role in regulating the securities industry.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a true statement about the goal of maximizing shareholder wealth?

Accepted Answer

A)   It takes into account the timing of cash-flows.
B)   It is a short-run point of view which takes risk into account.
C)   It considers risk as a factor.
D)   None of the other answers are correct.E) A) and B)
F) B) and D)

Question 10

According to agency theory, other than maximizing shareholder wealth what other self-interests do financial managers have?

Accepted Answer

Financial managers are interested in:
• ...

Question 11

The largest Canadian corporations are mainly

Accepted Answer

A)   widely held.
B)   family controlled.
C)   U.S. controlled.
D)   Japanese controlled.E) B) and D)
F) A) and B)

Question 12

There are some serious problems with the financial goal of maximizing the earnings of the firm.

Accepted Answer

A) True 
 B)False

Question 13

The financial markets allocate capital to corporations by

Accepted Answer

A)   reflecting expectations of the market participants in the corporation's share price.
B)   requiring higher returns from companies with lower risk than their competitors.
C)   rewarding companies with expected high returns with lower relative stock prices.
D)   relying on the opinion of investment dealers.E) A) and B)
F) All of the above

Question 14

The increasing percentage ownership of public corporations by institutional investors has

Accepted Answer

A)   had no effect on corporate management.
B)   created higher returns for the stock market in general.
C)   created more pressure on public companies to manage their firms more efficiently.
D)   taken away the voice of the individual investor.E) A) and B)
F) A) and C)

Question 15

A corporation is

Accepted Answer

A)   owned by shareholders who enjoy the privilege of limited liability.
B)   easily divisible between owners.
C)   a separate legal entity with perpetual life.
D)   all of the other answers are correctE) A) and B)
F) A) and C)

Question 16

The primary market includes the sale of securities by way of initial public offerings.

Accepted Answer

A) True 
 B)False

Question 17

Financial management builds upon the disciplines of economics and accounting. Describe what
a: economics provides the financial manager
b: accounting provides the financial manager

Accepted Answer

Economics provides the financial ...

Question 18

Which of the following securities is not included as part of the capital market?

Accepted Answer

A)   common stock
B)   commercial paper
C)   government bonds
D)   preferred stockE) B) and C)
F) A) and D)

Question 19

Existing securities are traded in the secondary market.

Accepted Answer

A) True 
 B)False

Question 20

When a corporation uses the financial markets to raise new funds, the sale of securities is made in the

Accepted Answer

A)   primary market.
B)   secondary market.
C)   on-line market.
D)   third market.E) All of the above
F) B) and C)

Exam 1: The Goals and Activities of Financial Management

Maximizing the earnings of the firm is the goal of financial management.

Correct AnswerverifiedShow Answer

The financial markets allocate capital to corporations by

Correct AnswerverifiedShow Answer

Existing securities are traded in the secondary market.

Correct AnswerverifiedShow Answer

During the 1930s, the provincial government assumed a much greater role in regulating the securities industry.

Correct AnswerverifiedShow Answer

Increased international competition can be seen as a motivator to emphasize

Correct AnswerverifiedShow Answer

The largest Canadian corporations are mainly

Correct AnswerverifiedShow Answer

The primary market includes the sale of securities by way of initial public offerings.

Correct AnswerverifiedShow Answer

When a corporation uses the financial markets to raise new funds, the sale of securities is made in the

Correct AnswerverifiedShow Answer

According to agency theory, other than maximizing shareholder wealth what other self-interests do financial managers have?

Correct AnswerverifiedFinancial managers are interested in:• ...View AnswerShow Answer

Which of the following is not a true statement about the goal of maximizing shareholder wealth?

Correct AnswerverifiedShow Answer

The increasing percentage ownership of public corporations by institutional investors has

Correct AnswerverifiedShow Answer

There are some serious problems with the financial goal of maximizing the earnings of the firm.

Correct AnswerverifiedShow Answer

Financial management builds upon the disciplines of economics and accounting. Describe what a: economics provides the financial manager b: accounting provides the financial manager

Correct AnswerverifiedEconomics provides the financial ...View AnswerShow Answer

The increase in the internationalization of financial markets has led to

Correct AnswerverifiedShow Answer

Insider trading occurs when

Correct AnswerverifiedShow Answer

The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

Correct AnswerverifiedShow Answer

What are the characteristics of a corporation?

Correct AnswerverifiedA corporation is characterized by...View AnswerShow Answer

Which of the following securities is not included as part of the capital market?

Correct AnswerverifiedShow Answer

A corporation is

Correct AnswerverifiedShow Answer

Profits of sole proprietorships are taxed at corporate tax rates.

Correct AnswerverifiedShow Answer

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Financial managers are interested in:
• ...
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Economics provides the financial ...
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A corporation is characterized by...
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