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Exam 1: The Role of Managerial Finance

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Question 51

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In the most recent year,two different companies generated the same earnings per share.The stocks of these two companies should trade at the same price.

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Question 52

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A treasurer is commonly responsible for handling ________.

A) tax management
B) corporate accounting
C) investing surplus funds
D) cost accounting

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Question 53

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A higher earnings per share (EPS)does not necessarily translate into a higher stock price.

As the risk of a stock investment increases,investors' ________.

The principle of the time value of money basically says that ________.

The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income.

________ decisions focus on how a company will spend its financial resources on long-term projects that ultimately determine whether the firm successfully creates value for its owners.

Which of the following is a strength of a corporation?

Financing decisions deal with the left-hand side of the firm's balance sheet.

If a firm's stockholders are risk averse,the firm can make its stockholders better off by earning the highest possible returns on its investments.

The marginal tax rate represents the rate at which the next dollar of income is taxed.

Which of the following is an example of agency cost?

Which of the following is NOT a reason that a firm that maximizes profits may fail to maximize shareholder wealth.

Suppose a certain business pays 10% tax on its first $10,000 in come,12% tax on income above $10,000 but below $40,000,and 22% tax on income above $40,000.Suppose the business earns $50,000 in income this year.It's marginal tax rate is ________.

Johnson,Inc.has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000.Although the firm paid in full for the merchandise during the year,it is yet to collect at year end from the customer.The net profit and cash flow from this sale for the year are ________.

The tax deductibility of various expenses such as general and administrative expenses ________.

The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.

The treasurer typically manages a firm's cash,investing surplus funds when available and securing outside financing when needed.

A financial manager must choose between four alternative Assets: 1,2,3,and 4.Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal,the financial manager would choose ________.

In finance we say that the goal of the firm ought to be to maximize profits.