Managerial Finance Test 1

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As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
True
Inflation is assumed to be a temporary problem that does not affect financial decisions.
False
Financial capital is composed of long term plant and equipment, as well as other tangible investments.
False
Real capital is composed of long term plant and equipment.
True
Recently the emphasis of financial management has been on the relationship of risk and return
True
"Credit default swaps" are one of the many tools congress and the president have developed to ease the financial crisis that began in 2008.
False
The Dodd Frank act contains the Volcker Rule, which encourages financial institutions to allow for more speculative investments for average investors.
False
The Dodd Frank act's oversight allowing regulation of banking fees and available products has been considered as not being in the best interest of the free market.
True
There is unlimited liability in a general partnership.
True
A limited partnership limits the amount of profits partners may receive.
False
A corporation must have more than 75 stockholders to qualify for Subchpater S designation.
False
Profits of a Subchapter S corporation are taxed at corporate tax rates.
False
The issues of corporate governance are actually agency problems.
True
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
False
The Sarbanes Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to select their preferred candidates to the board of directors.
False
A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities, and income in their financial statements.
True
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
False
There are some serious problems with the financial goal of maximizing the earnings of a firm.
True
Max earnings of a firm is a goal of financial management.
False
Money markets refer to markets where excess corporate cash is exchanged for foreign currencies that can earn a higher return than domestic money.
False
Higher return always induces stockholders to invest in a company.
False
Social responsibility is an expense and thus should be avoided by financial managers.
False
What did not contribute to the financial crisis?
The merger of JP Morgan Chase and Bear Sterns.
Credit swaps are
An insurance product designed to protect financial institutions from customers who default on their loans.
What is the primary goal of financial management?
Maximizing shareholder wealth.
What is NOT adressed in the Dodd Frank act?
Written certifications of financial statements by the CEO and CFO
One of the major advantages of a sole proprietorship is
low operating costs
Corporate governance is
the relationship and exercise of oversight by the board of directors of the company.
Agency theory examines the relationship between
owners of the firm and managers of the firm.
Agency theory would imply that conflicts are more likely to occur between management and shareholders if
if the chairman of the board is also the CEO.
Agency problems least likely occur in
sole proprietorships
The Sarbanes Oxely act set up The Public Accounting Oversight board with the responsibility of
auditing standards within companies.
controlling the quality of audits
setting rules and standards for the independent auditors
What is not true about maximizing shareholder wealth
it is a short term point of view that takes risk into account
Money markets include
treasury bills and commercial paper
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