foundation of fundamental management

1. What is the primary goal of financial management? A. Increased carnings B. Maximizing cash flow C. Maximizing sharcholder wealth D. Minimizing risk of the firm 2. Ageney theory examines the relationship between the owners of the firm and the managers of the firm. TRUE/FALSE 3. Agency theory examines the relationship between companies and their customers. TRUE/FALSE 4. Capital markets refer to those markets dealing with short-4erm securities having a life of one year or less. TRUF/FAI.SE 5. Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide. TRUE/FALSE 6. Insider trading involves the use of information not available to the general public to make profits from trading in a company's shares. TRUE/FALSE 7. Companies that have higher risk than a competitor in the same industry will generally have: A. to pay a lower interest rate than its competitors. B. a higher relative stock price than its competitors. C. a lower cost of funds than its competitors. D. to pay a higher interest rate than its coenpetitors. 8. The sale of a firm's preferred shares is a souree of funds, whereas the payment of preferred dividends is a use of funds. TRUE/FALSE 9. Earnings available to common sharcholders includes potential dividends to be paid to preferred shareholders. TRUE/FALSE 10. When a firm has a sharp drop off in carnings, its P. E ratio may be artificially high. TRUE/FALSE 11. Which of the following is not a primary soutce of capital to the firm? A. Assets B. Common stock C. Preferred stock D. Bonds 12. A firm has $3,500,000 in its common stock account and $2,500,000 in its retained carnings account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold? A. 535 per share B. $25 per share C. $60 per share D. Not enough information to tell