Test Bank for Contemporary Financial Management 13th Edition by Moyer Complete downloadable file at: Shareholderwealthmaximization Socialresponsibility Longrunsurvival Profitmaximization ANSWER: a The shareholder wealth maximization goal states that management should seek to maximize the of theexpected future returns to the owners of the firm. Futurevalue Compoundvalue Percentagevalue Presentvalue ANSWER: d investingdecisions financingdecisions dividenddecisions taximplicationdecisions ANSWER: d Shareholderwealthismeasuredbythe oftheshareholders'commonstockholdings. Bookvalue Marketvalue Historicvalue Compoundvalue ANSWER: b Thelimitationsoftheprofitmaximizationgoalinclude: Itlacksatimedimension(i.e.,itisstatic) Itfailstoconsiderrisk Thedefinitionofprofitisambiguous Alltheabovearelimitations ANSWER: d Theobjectiveofmaximizingshareholderwealth,asmeasuredbythemarketvalueofthefirm'sstock doesnotconsiderthetimingofthebenefitsreceived providesawaytoconsidertheriskofthereturnsbeingoffered
"goldenparachute"contracts excellentpay executiveperks jobsecurity ANSWER: a arisefromthedivergentobjectivesbetweenownersandmanagers. Shareholderrelationships Stakeholderproblems Creditorproblems Agencyproblems ANSWER: d Agencycostsincludeallofthefollowingexcept: expenditurestomonitormanagement'sactions providingstockaspartofmanagement'scompensation flotationcosts bondingexpenditures ANSWER: c Apotentialagencyconflictcanarisebetweenstockholdersandcreditorsbecauseownersmay increasetheriskofafirm'sinvestments decreasetheamountofdebtoutstanding decreasetheriskofafirm'sinvestments increasethefirm'snetworth ANSWER: a Creditorshaveafixedfinancialclaimonacompany'sresourcesthroughallofthefollowingEXCEPT: longtermdebt bankloans preferredstock commercialpaper ANSWER: c Agencyproblemsmaygiverisetocoststhat themarketvalueoffirms. increase decrease donotaffect arenotimportantto ANSWER: b
stockholdersandcreditors,andmanagementandworkers managementandcreditors ANSWER: a Protectivecovenantsinacompany'sbondindenturesareusedinagencyrelationshipsinvolving . stockholdersandmanagers stockholdersandcreditors managementandworkers managementandcreditors ANSWER: b Thechieffinancialofficer(CFO)ofacorporationnormallyreportstothe ofthecompany. chairmanoftheboardofdirectors chiefoperatingofficer controller chiefexecutiveofficer ANSWER: d The FinancialExecutivesInstitute FinancialManagementAssociation AmericanFinanceAssociation InstitutionofFinancialAnalysts ANSWER: b Allofthefollowingeconomicenvironmentfactorsaffectstockpricesexcept: investmentstrategies competition taxrates currencyexchangerates ANSWER: a Themajorfactorsthatdeterminethemarketvalueofacompany'ssharesofstockincludethe . riskofitscashflows timingofitscashflows bookvalueofitsassets riskofitscashflowsandthetimingofitscashflows ANSWER: d
. geographicaldispersionofshareholders separationofownershipandcontrol agedifferencesbetweenmanagersandshareholders thatbothhavetheirownagendas ANSWER: b socialresponsibilityconcerns agedifferencesbetweenmanagersandowners agencyrelationships ANSWER: c Theactivitiesofthetreasurerincludeallofthefollowingexcept: financialplanning taxpreparation creditanalysis pensionfundmanagement ANSWER: b Themostimportantmanagerialobjectiveisto: makeMC=MR maximizeprofits minimizeagencycosts noneofthese ANSWER: d cashsales cashflows cashprofits netprofits ANSWER: b Onemethodofdecreasingthecashoutflowsofafirmisto decreasedepreciation increasecapitalexpenditures decreasedividends increasedebtrepayment
withintheglobaleconomicviewpoint. withregardtogovernmentallawsandculturaleffectiveness. whentheaddedbenefitsexceedtheaddedcosts. basedontheimpactofpublicopinion. ANSWER: c Therearethreeformsofbusinessorganization.Whichofthefollowinghasunlimitedliability? Corporation Generalpartnership OnlystatementIiscorrect OnlystatementIIiscorrect BothstatementsIandIIarecorrect NeitherstatementInorIIiscorrect ANSWER: b Themanagerialdecisionthatemergesfromthemicroeconomicprofitmaximizationmodelis: MarginalCosts<MarginalRevenues MarginalCosts=Profits MarginalRevenues>MarginalCosts MarginalCosts=MarginalRevenue ANSWER: d 10K&14BCorporations Section8andSubchapterSCorporations SubchapterSandLLCs 10KCorporationsandLLCs ANSWER: c Thetypeofcorporatesecuritythatpaysperiodicinterestaswellastheeventualreturnofprincipalis: Preferredstock DebtSecurities EquitySecurities Fixedassetloans ANSWER: b WhatisthefunctionoftheCFO? Controloftheaccountingfunctionsofthefirm. Effectivecommunicationwiththeinvestmentcommunityaboutthefirm’sperformance. Oversightofthefinancialstatements. Determinationofeffectivetaxreductionstrategies.
ExpendituresassociatedwithSECapproval. Expendituresassociatedwithmonitoringmanagement’sactions Expendituresassociatedwithinventorycontrol. ANSWER: c Explainthechainofcommandinacorporation. ANSWER: Therearefivecompetitiveforcesthatinfluenceanindustry’sstructure. ANSWER: 1.Thethreatofnewentrants. Thethreatofsubstituteproducts Thebargainingpowerofbuyers Thebargainingpowerofsuppliers Therivalryamongcurrentcompetitors Whataretheshortcomingsintheprofitmaximizationobjectiveasamanagerialstrategy? ANSWER: 1.Profitmaximizationlacksatimedimension. Thereisaquestionastowhichprofitistobemaximized:totalprofit,rateofprofitorEPS. Thereisnodirectwaytoconsidertheriskassociatedwithalternativedecisions. Preferredstockisconsideredprioritystock.Explainthispriority. ANSWER: WhatistheadvantageofanLLCoveranLLPbusinessform? ANSWER: AnLLC(orlimitedliabilitycompany)hasthreeadvantages: Hasbetteraccesstocapitaltofinancegrowth. Itenablesbroademployeeownershipofthefirm. Itenablesthefirmtoengageinstrategicacquisitions. Listexamplesofagencycostswhichareincurredbyshareholdersintryingtominimizeagencyproblems. ANSWER:
Bondingexpenditurestoprotecttheownersfrommanagerialdishonesty. avoidingrisk makingaprofit expanding inventorycontrol ANSWER: d collateralizedmortgageobligationscandal Treasurybondtradingscandal insiderstocktradingscandal economicstimuluspackagescandal ANSWER: d provideadirectmeasureofthesuccessofdecisionsmadebyafirm’smanagers. profits stockprices sales dividendspershare ANSWER: b