1. Current profit maximization:

a.is the ultimate goal of a firm

b.is a long-run concept

c.always maximizes the current wealth of the owners

d.is a goal that does not consider future cash flows or risk

2. A business manager is an agent to the owners (the principals) and has _____ to those principals:

a.no responsibility

b.a fiduciary responsibility

c.an obligation to the community only

d.a legal obligation called "best practices"

3. Which of the following is least related to the valuation of a firm's stock for most corporations?

a.amount of cash flows generated

b.amount of cash on hand

c.timing of cash flows

d.risk associated with cash flows

4. A signal that is likely to be inferred by the market when new common stock is issued is:

a.prospects of the firm are worse than generally believed

b. prospects of the firm are better than generally believed

c.the firm is preparing for a new debt issue

d.new management or directors of the board are being put in place

5. With respect to cash:

a.because of the time value of money, the less cash you receive, the better

b.cash earns interest in the short term only

c.you would agree to pay some given amount of cash in the future rather than the same given amount to be paid now

d.the longer you are asked to wait to receive money the better