Question 1. Wealth maximization as the goal of the firm implies enhancing the wealth of
1. the Board of Directors.
2. the federal government.
3. the firm's employees.
4. the firm's stockholders.
Question 2. The difference between the cost of funds used to finance an investment and its after-tax operating profits is called
1. earnings per share.
2. dividend.
3. economic value added.
4. retained earnings.
Question 3. A "legal entity" which can sue and be sued, make and be party to contracts, and acquire property in its own name is
1. a professional partnership.
2. a partnership.
3. a sole proprietorship.
4. a corporation.
Question 4. The agency problem may result from a manager's concerns about any of the following EXCEPT
1. company-provided perquisites.
2. personal wealth.
3. job security.
4. corporate goals.
Question 5. The Sarbanes-Oxley Act of 2002 did all of the following EXCEPT
1. toughen penalties against overcompensated executives.
2. tighten audit regulations and controls.
3. all of these are true.
4. toughen penalties against executives who commit corporate fraud.
Question 6. The financial manager's financing decisions determine
1. the proportion of the firm's earnings to be paid as dividend.
2. both the mix and the type of assets found on the firm's balance sheet.
3. both the mix and the type of assets and liabilities found on the firm's balance sheet.
4. the most appropriate mix of short-term and long-term financing.
Question 7. If a corporation sells certain assets for more than their initial purchase price, the difference between the sale price and the purchase price is called a(n)
1. ordinary gain.
2. capital gain.
3. ordinary loss.
4. capital loss.