Question

Profit maximization does not adequately describe the goal of the firm because

	I.	profit maximization does not require the consideration of risk
	II.	profit maximization considers the timing of a project's return
	III.	maximization of dividend payout ratio is a better description of the goal of a firm
	IV.	both I and II
	V.	None of the above

1. Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth?
         

   I. profit maximization
   II. risk minimization
   III. maximization of the total market value of the firm's common stock

   IV maximization of market price per share

   
         

   	I.	I and II only
   	II.	II and III only
   	III.	III and IV only
   	IV.	I and III only
   	V.	I and IV only

1. The true owners of the corporation are the

   	I.	holders of debt issues of the firm
   	II.	none of the above
   	III.	common stockholders
   	IV.	board of directors
   	V.	preferred stockholders

Ms Tamika, a financial manager of a corporation, is considering numerous different operating strategies for the coming year.  From a financial management standpoint, which of the following would be her optimal strategy?

	I.	To undertake the plan that would be of least risk to the firm
	II.	To undertake the plan that would maximize the current price of existing stock
	III.	To undertake the plan that would result in a profit for the year
	IV.	To undertake the plan that would be least expensive for the firm
	V.	None of the above

Which of the following categories of owners enjoy limited liability?

	I.	general partners in a limited partnership
	II.	None of the above.
	III.	shareholders (common stock) of a corporation
	IV.	sole proprietors
	V.	both a and b

Which of the following Mechanisms is used by shareholders to motivate management?

	I.	Threat of Firing
	II.	Leveraged Buyouts
	III.	Managerial Compensation
	IV.	Threat of Firing and Managerial Compensation
	V.	None of the above

Answer 1

• Profit maximization does not adequately describe the goal of the firm because - Correct option is IV. both I and II
• Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth?- Correct option is III. III and IV only.
• The true owners of the corporation are the - Correct option is III. common stockholders
• Ms Tamika, a financial manager of a corporation, is considering numerous different operating strategies for the coming year.  From a financial management standpoint, which of the following would be her optimal strategy? - Correct option is II. To undertake the plan that would maximize the current price of existing stock
• Which of the following categories of owners enjoy limited liability?- Correct option is III. Shareholders (common stocks) of a corporation
• Which of the following Mechanisms is used by shareholders to motivate management? - correct option is IV. Threat of Firing and Managerial compensation