Data from both Europe and the United States found that companies that created the most shareholder value showed ( stronger or weaker ) employment growth.

2. True or False In the past 30 years there have been at least six financial crises that arose largely because companies and banks were financing illiquid assets with short term debt.

3. True or False Two activities that managers often use in an attempt to increase share price but that do not actually create value are changes in capital structure (or financing or the firm) and changes in accounting practices.

4. True or False Maximizing current share price is not equivalent to maximizing long-term value because managers, who know more than shareholders about the firms prospects, could slash crucial expenses to improve the stock price in the short term. Eventually, this will catch up to the firm, and the long term stock price will suffer.

5. True or False During the Internet boom of the late 1990s, many firms lost sight of value creation principles by blindly pursuing profits without pursuing growth.

6. The empirical evidence shows that the link between the value created by the acquisition of another company and earnings per share (EPS):

A. Is strong and positive.

B. Does not exist.

C. Is weak and negative.

D. Is strong and negative.

7. Paying attention to which of the following tends to lead a company doing well in the stock market?

A. Cash flow.

B. Earnings per share.

C. Growth.

D. Return on invested capital.

a. I and II only.

b. II and III only.

c. II, III, and IV only.

d. I, III, and IV only.

8. A firm that grows rapidly will:

A. Always create value.

B. Create value if the return on invested capital (ROIC) is greater than the cost of obtaining funds.

C. Create value if the return on invested capital (ROIC) is less than the cost of obtaining funds.

D. Create value if the firm increases market share.

9. In order to create long-term value, companies must:

A. Focus on keeping costs at a minimum. B. Find the optimal debt-to-equity ratio.

B. Seek and exploit new sources of competitive advantage.C. Monitor and follow macroeconomic trends.

10. The recent experience with the securitization of risky home loans illustrated how:

A. Value could be created by the diversification of risk and increased number of investors.

B. Value could be created by diversification of risk only.

C. Value could be created by the increased number of investors only.

D. Value cannot be created by securitization.