FINANCIAL MANAGEMENT PRACTICE TEST 1 QUESTIONS AND CORRECT ANSWERS

FINANCIAL MANAGEMENT PRACTICE
TEST 1 QUESTIONS AND CORRECT
ANSWERS
AgencyA2CostsA2ReferA2to:A2-A2Ans--
C)A2theA2costsA2thatA2ariseA2dueA2toA2conflictA2ofA2interestA2betweenA2shareholdersA2andA2
managers

WhichA2ofA2theA2followingA2isA2theA2bestA2bondingA2expenditureA2toA2helpA2limitA2agencyA2
costs?A2-A2Ans--
B)A2aA2contractA2wherebyA2theA2managerA2willA2forfeitA2aA2portionA2ofA2hisA2deferredA2com
pensationA2inA2theA2eventA2ofA2poorA2performance

WhichA2ofA2theA2followingA2isA2FALSEA2regardingA2equityA2capital?A2-A2Ans--
D)A2preferredA2stockholdersA2canA2forceA2theA2firmA2intoA2bankruptcyA2ifA2dividendA2paym
entsA2areA2notA2paid

InA2general,A2theA2moreA2debtA2aA2firmA2usesA2inA2relationA2toA2itsA2totalA2assetsA2-A2Ans--
C)A2theA2greaterA2theA2financialA2leverageA2itA2uses

TheA2Sarbanes-A2OxleyA2ActA2ofA22002A2-A2Ans--
B)A2requiresA2CEOA2andA2CFOsA2ofA2allA2largeA2companiesA2toA2personallyA2certifyA2theirA
2firms'A2financialA2statements


WhichA2ofA2theA2followingA2isA2NOTA2aA2strengthA2ofA2theA2CorporateA2formA2ofA2business
?A2-A2Ans--C)A2unlimitedA2liability

WhatA2isA2theA2goalA2ofA2financialA2management?A2-A2Ans--
B)A2maximizeA2shareholdersA2wealth

WhatA2rationA2measuresA2theA2abilityA2ofA2theA2firmA2toA2satisfyA2itsA2shortA2termA2obligatio
nsA2asA2theA2comeA2dueA2?A2-A2Ans--C)A2currentA2ratio

WhichA2ofA2theA2followingA2statementsA2isA2FALSE?A2
I)A2aA2firmsA2creditorsA2areA2primarilyA2interestedA2inA2aA2firmsA2activityA2ratios
II)A2normsA2existA2forA2allA2financialA2ratiosA2thatA2canA2beA2appliedA2acrossA2allA2industrie
sA2
A2III)A2CurrentA2andA2futureA2stockholdersA2areA2mostA2interestedA2inA2aA2firmsA2shortA2ter
mA2liquidityA2ratiosA2-A2Ans--allA2ofA2theA2aboveA2statementsA2areA2false