FIN242 - INTRODUCTION

Which of the following best describes the goal of the firm?

• the maximization of the total market value of the firm's common stock

• profit maximization

• risk minimization

• all of the above are equally important

Which of the following is an advantage of sole proprietorship?

• limited liability for its owners

• double taxation for its owners

• no significant legal requirements for starting the business

• easily transferred ownership

The true owners of the corporation are the:

• holders of debt issues of the firm

• preferred stockholders

• board of directors of the firm

• common stockholders

Money market instruments include

• common stock

• preferred stock

• T-Bonds

• T-Bills

An example of a primary market transaction is:

• a new issue of common stock by AT&T

• a sale of some outstanding common stock of AT&T by an investor

• AT&T repurchasing its own stok from a stokholder

• All of the above

Financial intermediaries:

• offer indirect securities

• include the national and regional stock exchange

• usually are underwriting syndicate

• constitute the various secondary markets

Profit maximization does not adequately describe the goal of the firm because:

• profit maximization does not require the consideration of risk

• profit maximization ignores the timing of a project's return

• maximization of dividend payout ratio is a better description of the goal of the firm

• a and b

One problem with maximization of shareholder wealth as a goal is that it ignores risk taken by the firm's financial managers.

• True

• False

The following are the function of Financial Managers except

• to determine the customers' needs

• to allocate the resources of find

• to find the best sources of finance

• to manage the cash efficiently

The goal of the firm should be:

• maximization of profits

• maximization of shareholder wealth

• maximization of market share

• maximization of sales