1. The best measure of how well management is doing on behalf of its stockholders is

a. The size of the dividend paid b. The level of total profits c. The common stock price d. The earnings per share

2. If the goal of the financial manager were to maximize earnings per share
   1. risk would matter c. the timing of returns would not matter
   2. the company would never pay a dividend d. all of the above

3. The market price of a firm's stock

1. changes when stockholders become dissatisfied with management performance
2. ignores the timing of earnings per share
3. does not change when a company's risk changes
4. is not affected by dividends

4. The ________ decision begins with the determination of the total amount of assets needed and also involves decisions related to which assets should be reduced, eliminated or replaced.

a. Investing b. Wealth management

c. Financing c. Asset management

5. The basic reason for underwriting a security issue is to:

1. relieve the issuing firm of the risk of not selling the issue at the established
2. reduce marketing costs
3. get the best publicity possible for the new
4. ensure its sale at the highest price

6. Another term for a rights offering is a

1. privileged subscription c. direct placement
2. preemptive right d. rights-on subscription

7. The role of the Securities and Exchange Commission is to

1. ensure that financial securities sell at the highest possible market price, given their individual risk/return characteristics
2. recommend top-quality securities to potential investors
3. analyze corporate financial statements and issue ratings based on risk
4. ensure that investors have access to full and fair information concerning investments

8. The expected return on a security typically increases as

a. taxability decreases b. default risk decreases c. maturity increases d. marketability increases