1. What should be the goal of a corporation?

a) Profit Maximization b) Earnings Per Share Maximization c) Shareholder Wealth Maximization d) Social Welfare Maximization

2. Which of these is NOT a way of reducing agency conflict between shareholders and managers?

a) Compensation packages that feature stock options b) Threat of bankruptcy c) Threat of hostile takeover d) All of the above are ways of reducing conflicts between shareholders and managers

3. If the stock market is not weak form efficient then it is possible to consistently earn positive abnormal returns through ________.

a) Charting b) Fundamental Analysis c) Insider Trading d) All of the above

4. If a firm receives cash in exchange for their accounts receivable (cash increases and accounts receivable decreases by the same amount), then the firm's current ratio will ___.

a) Increase b) Decrease c) Remain unchanged d) It depends

5. Which is not one of the problems associated with using financial statements?

a) Different firms might follow different rules under GAAP b) Firms might window dress in order to make their statements look better c) Some firms might use Off Balance Sheet forms of financing d) None of the above (All of the above are problems)

6. Suppose one firm uses accelerated depreciation (like MACRS) while another firm uses straight line depreciation. In the early years, the firm using MACRS will show a _________.

a) Lower Profit Margin b) Lower Operating Cash Flows c) Lower Debt Ratio d) All of the Above