Chapter 1 The Role of Managerial Finance

27) Which of the following is
true of cash flows and risk?
A) Low cash flow and low risk
result in an increase in share price.
B) High cash flow and low risk
result in an increase in share price.
C) High cash flow and high risk
result in an increase in share price.
D) Lo cash flow and high risk
result in an increase in share price.

28) As the risk of a stock
investment increases, investors’ ________.
A) return will increase
B) return will decrease
C) required rate of return will
decrease
D) required rate of return will
increase

29) If the CEO of a company were
to pass away, what do you think would happen to price of the stock?
A) It would decrease because of
the perceived increased risk due of lack of near-term leadership.
B) It would increase because of
the perceived increased risk due of lack of near-term leadership.
C) It would decrease because of
the perceived decreased risk due of lack of near-term leadership.
D) It would increase because of
the perceived decreased risk due of lack of near-term leadership.

30) Which of the following is
true of a cash flow?
A) Profits do not necessarily
result in cash flows available to the stockholders.
B) It is guaranteed that the
board of directors will increase dividends when net cashflows increase.
C) A firm’s income statement will
never show a positive profit when its cash outflows exceed its cash inflows.
D) An increase in revenue will
always result in an increase in cash flow.

31) 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.

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Based on the wealth maximization
goal, the financial manager would choose ________.
A) Asset 1
B) Asset 2
C) Asset 3
D) Asset 4

32) 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 ________.

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A) choose Asset 1
B) choose Asset 2
C) choose Asset 3
D) be indifferent between Asset 1
and Asset 2

33) Which of the following is
true of stakeholders?
A) They are the owners of a firm.
B) They are groups to whom a firm
has financial obligations.
C) They are groups having a
direct economic link to a firm.
D) They include only the
bondholders, common stockholders, and preferred stockholders

34) Which of the following is an
example of a firm’s stakeholder?
A) suppliers
B) Federal reserve
C) media
D) competitors