Bus Finance (ABM_BF12-IIIa-1)
Quiz by Nida Flores
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- Q1
1.The primary goal of the financial manager is
maximizing profit.
minimizing risk.
maximizing wealth.
minimizing return.
30sABM_BF12-IIIa-1 - Q2
2.Corporate owner's receive realizable return through
earnings per share and cash dividends.
increase in share price and earnings per share.
increase in share price and cash dividends.
profit and earnings per share.
30sABM_BF12-IIIa-1 - Q3
3.The wealth of the owners of a corporation is represented by
cash flow.
profits.
share value.
earnings per share.
30sABM_BF12-IIIa-1 - Q4
4. Wealth maximization as the goal of the firm implies enhancing the wealth of
the Board of Directors.
the firm's employees.
the firm's stockholders.
the federal government
30sABM_BF12-IIIa-1 - Q5
5.The goal of profit maximization would result in priority for
timing of the returns.
earnings per share.
cash flows available to stockholders
risk of the investment.
30sABM_BF12-IIIa-1 - Q6
6.Profit maximization as a goal is not ideal because it does NOT directly consider
cash flow and stock price.
risk and EPS(Earning Per Share).
EPS(Earning Per Share) and stock price
risk and cash flow.
30sABM_BF12-IIIa-1 - Q7
7. Profit maximization as the goal of the firm is not ideal because
profits today are less desirable than profits earned in future years.
profits are only accounting measures
profit maximization does not consider risk.
cash flows are more representative of financial strength
30sABM_BF12-IIIa-1 - Q8
8. Profit maximization fails because it ignores all EXCEPT
earnings per share.
risk.
the timing of returns.
cash flows available to stockholders.
30sABM_BF12-IIIa-1 - Q9
9.The key variables in the owner wealth maximization process are
earnings per share and risk.
cash flows and risk.
profits and risk.
earnings per share and share price.
30sABM_BF12-IIIa-1 - Q10
10.Cash flow and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.
a higher share price
a lower share price
an unchanged share price
an undetermined share price
30sABM_BF12-IIIa-1 - Q11
11.Cash flow and risk are the key determinants in share price. Increased risk, other things remaining the same, results in
a lower share price
a higher share price.
an unchanged share price.
an undetermined share price.
30sABM_BF12-IIIa-1 - Q12
12.Financial managers evaluating decision alternatives or potential actions must consider
risk, return, and the impact on share price.
both risk and return.
only risk.
only return.
30sABM_BF12-IIIa-1 - Q13
13.A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.
Based on the profit maximization goal, the financial manager would choose
Asset Year 1 Year 2 Year 3
1 $ 21,000 $ 15,000 $ 6,000
2 $ 9,000 $ 15,000 $ 21,000
3 $ 3,000 $ 20,000 $ 19,000
4 $ 6,000 $ 12,000 $ 12,000
Asset 2.
Asset 4.
Asset 1.
Asset 3.
30sABM_BF12-IIIa-1 - Q14
14. A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would
Asset Year 1 Year 2 Year 3
1 $ 21,000 $ 9,000 $ 15,000
2 $ 15,000 $ 15,000 $ 15,000
3 $ 9,000 $ 21,000 $ 15,000
$ 45,000 $ 45,000 $ 45,000
choose Asset 1.
choose Asset 3.
be indifferent between Asset 1 and Asset 2.
choose Asset 2.
30sABM_BF12-IIIa-1