1) The goal of the firm should be.
A. maximization of profits
B. maximization of shareholder wealth
C. maximization of consumer satisfaction
D. maximization of sales

2) An example of a primary market transaction is
A. a new issue of common stock by AT&T
B. a sale of some outstanding common stock of AT&T
C. AT&T repurchasing its own stock from a stockholder
D. one stockholder selling shares of common stock to another individual

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3) According to the agency problem, _________ represent the principals of a corporation.
A. shareholders
B. managers
C. employees
D. suppliers

Some textbook specify Shareholder as answer.

4) Which of the following is a principle of basic financial management?
A. Risk/return tradeoff
B. Derivatives
C. Stock warrants
D. Profit is king

5) Another name for the acid test ratio is the
A. current ratio
B. quick ratio
C. inventory turnover ratio
D. average collection period

6) The accounting rate of return on stockholders’ investments is measured by
A. return on assets
B. return on equity
C. operating income return on investment
D. realized rate of inflation

7) If you are an investor, which of the following would you prefer?
A. Earnings on funds invested compound annually
B. Earnings on funds invested compound daily
C. Earnings on funds invested would compound monthly
D. Earnings on funds invested would compound quarterly

8) The primary purpose of a cash budget is to
A. determine the level of investment in current and fixed assets
B. determine accounts payable
C. provide a detailed plan of future cash flows
D. determine the estimated income tax for the year

9) Which of the following is a non-cash expense?
A. Depreciation expenses
B. Interest expense
C. Packaging costs
D. Administrative salaries

10) The break-even model enables the manager of a firm to
A. calculate the minimum price of common stock for certain situations
B. set appropriate equilibrium thresholds
C. determine the quantity of output that must be sold to cover all operating costs
D. determine the optimal amount of debt financing to use

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