POP QUIZ

 Financial structure refers to..............

• short-term resources

• all the financial resources

• long-term resources

• all of these

The market value of the firm is the result of..........

• dividend decisions

• working capital decisions

• capital budgeting decisions

• trade-off between risk and return

Risk-return trade off implies........

• Increasing the portfolio of the firm through increased production

• Not taking any loans which increases the risk

• Not granting credit to risky customers

• Taking decision in such a way which optimizes the balance between risk

                    and return

              is a specific risks factor

• Market risks

• Inflation risks

• Interest rate risks

• Financial risks

Which of the following statements is correct regarding profit maximization as the primary goal of the firm?

• Profit maximization considers the firm's risk level

• Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.

• Profit maximization does consider the impact on individual shareholder's EPS

• Profit maximization is concerned more with maximizing net income than the stock price.

Shareholder’s wealth maximization

• is a short-term perspective

• ignores the time value of money

• considers risk and uncertainty

• All the answers

The most important goal of a company is to

• increase profits

• reduce costs and expenses

• increase sales revenues

• increase the market price of the company’s common stock

Managers are generally assumed to be

• risk takers

• risk averse

• risk indifferent

• risk seekers

The decision functions of financial management cover

• investment decisions

• financing decisions

• asset management decisions

• All the answers

Which of the following statements about the goal of maximizing shareholders’ wealth is  FALSE?

• It considers timing of returns

• It ignores uncertainty and risk

• It aims to maximize the market price of the firm’s common stock

• It is a long-term perspective