Chapter 1
CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT
General Directions: Encircle the letter of the correct answer on the space provided for.
1. The primary goal of a publicly owned corporation is to ________. a. maximize dividends per share b. maximize shareholder wealth c. maximize earnings per share after taxes d. minimize shareholder risk
2. A financial manager is considering two projects, A and B. A is expected to add P5 million to profits this year while B is expected to add P3 million to profits this year. Which of the following statements is most correct?
a. The manager should select project A because it maximizes profits. b. The manager should select the project that maximizes long-term profits, not just one year of profits. c. The manager should select project A or he is irrational. d. The manager should select the project that causes the stock price to increase the most, which could be A or B.
3. Shareholder wealth maximization means ________. a. maximizing earnings per share b. maximizing dividends per share c. maximizing the price of existing common stock d. maximizing stockholders equity
4. A limited partnership provides limited liability to ________. a. all general partners b. only limited partners responsible for day to day management of the firm c. only to limited partners who do not participate in the management of the business d. all partners
5. Pie is deciding whether or not to invest P50,000 in a business that has pending lawsuits against it. If Pie invests and the business loses the lawsuits, the most Joe can lose is __________.
a. P50,000 if Joe is a general partner b. P50,000 is Joe is a sole proprietor c. P50,000 if Joe is a limited partner d. P50,000 plus his share of the lawsuits if Joe is a limited partner
6. All of the following business organizations provide limited liability to their owners except: a.
AN OVERVIEW OF FINANCIAL MANAGEMENT
General Directions: Encircle the letter of the correct answer on the space provided for.
1. The primary goal of a publicly owned corporation is to ________. a. maximize dividends per share b. maximize shareholder wealth c. maximize earnings per share after taxes d. minimize shareholder risk
2. A financial manager is considering two projects, A and B. A is expected to add P5 million to profits this year while B is expected to add P3 million to profits this year. Which of the following statements is most correct?
a. The manager should select project A because it maximizes profits. b. The manager should select the project that maximizes long-term profits, not just one year of profits. c. The manager should select project A or he is irrational. d. The manager should select the project that causes the stock price to increase the most, which could be A or B.
3. Shareholder wealth maximization means ________. a. maximizing earnings per share b. maximizing dividends per share c. maximizing the price of existing common stock d. maximizing stockholders equity
4. A limited partnership provides limited liability to ________. a. all general partners b. only limited partners responsible for day to day management of the firm c. only to limited partners who do not participate in the management of the business d. all partners
5. Pie is deciding whether or not to invest P50,000 in a business that has pending lawsuits against it. If Pie invests and the business loses the lawsuits, the most Joe can lose is __________.
a. P50,000 if Joe is a general partner b. P50,000 is Joe is a sole proprietor c. P50,000 if Joe is a limited partner d. P50,000 plus his share of the lawsuits if Joe is a limited partner
6. All of the following business organizations provide limited liability to their owners except: a.