FM - Ch -1&2

Which of the following is NOT one of the three main types ofdecision facing the financial manager in a company?

• Dividend decision

• Investment decision

• Economic decision

• Financing decision

Which of the following is an example of a financial objective that acompany might choose to pursue?

• Provision of good wages and salaries

• Dealing honestly and fairly with customers on all occasions

• Producing environmentally friendly products

• Restricting the level of gearing to below a specified target level

Which of the following is a problem associated with managerialreward schemes?

• By rewarding performance, an effective scheme creates anorganisation focused on continuous improvement

• Schemes based on shares can motivate employees/managers toact in the long-term interests of the company

• Self-interested performance may be encouraged at the expenseof team work

• Effective schemes attract and keep the employees valuable to an Organisation

The policies pursued by a government may serve various objectives.Which of the following is not one of the principle objectives ofmacroeconomic policy?

• Economic growth

• Price stability

• Balance of payments surplus

• Full employment

H Co's share price is $3.50 at the end of and this includes a capital gain of $0.75 since the beginning of the period. A dividend of $0.25 has been paid for 20X1.

What is the shareholder return (to 1 decimal place)?

• 36.4%

• 38.4%

• 26.6%

• 40.8%

7 A government body uses measures based upon the 'three Es' to measure value for money generated by a publicly funded hospital. Which of the following relates to efficiency?

• Cost per successfully treated patient

• Cost per operation

• Proportion of patients readmitted after unsuccessful treatment

• Percentage change in doctors' salaries compared with previous year

8 Increasing which TWO of the following would be associated with the financial objective of shareholder wealth maximisation?

•   Share price

• Dividend payment

• Reported profit

• Earnings per share

• Weighted average cost of capital

What method of managing exchange rates allows a currency to fluctuate but only within a

relatively narrow range around a target rate?

• Managed peg

• Crawling peg

• Fluctuating peg

• Floating peg

Which of the following is a sign that a company is failing to maximise shareholder wealth?

• Management has challenging performance bonuses

• Investment decisions are evaluated on the basis of their net present value

• The company has not diversified its operations

• Financing of the company is via equity finance alone

The agency problem is a driving force behind the growing importance attached to sound corporate governance. In this context, the 'agents' are the:

• Customers

• Shareholders

• Managers

• Auditors