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Financial Management Excercise, Exercises of Financial Management

Vietnam National University Ho Chi Minh City (VNUHCM)Financial Management

Financial Management Excercise chapter 1, 2, 3

Typology: Exercises

2019/2020

Uploaded on 10/25/2021

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Chapter 01 - Goals and Governance of the Firm

1-1

Chapter 01

Goals and Governance of the Firm

Multiple Choice Questions

1. Finance, generally, deals with:

I) Money; II) Markets; III) People

A. I only

B. I and II only

C. I and III only

D. I, II and III

2. This book is mainly about:

A. financial decisions made by households

B. financial decisions made by corporations

C. financial decisions made by governments

D. none of the above

3. The following are examples of the United States-based corporations except:

I) Boeing; II) Microsoft; III) Bank of America; IV) Sony

A. I only

B. I and II only

C. I, II, and III only

D. IV only

4. The following are examples of foreign-based corporations except:

I) British Petroleum; II) General Electric; III) Sony; IV) Volkswagen

A. I only

B. II only

C. II and III only

D. I, II, & IV only

Discover Exercises of Financial Management Vietnam National University Ho Chi Minh City (VNUHCM)

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Chapter 01 Goals and Governance of the Firm

Multiple Choice Questions

Finance, generally, deals with: I) Money; II) Markets; III) People A. I only B. I and II only C. I and III only D. I, II and III
This book is mainly about: A. financial decisions made by households B. financial decisions made by corporations C. financial decisions made by governments D. none of the above
The following are examples of the United States-based corporations except: I) Boeing; II) Microsoft; III) Bank of America; IV) Sony A. I only B. I and II only C. I, II, and III only D. IV only
The following are examples of foreign-based corporations except: I) British Petroleum; II) General Electric; III) Sony; IV) Volkswagen A. I only B. II only C. II and III only D. I, II, & IV only

Shareholders of a corporation may be, among others: I) Individuals; II) Pension Funds; III) Insurance Companies A. I only B. I and II only C. II only D. I, II and III
Generally, a corporation is owned by the: I) Managers; II) Board of Directors; III) Shareholders A. I only B. II and III C. III only D. I, II and III
Corporations, potentially, have infinite life because: A. it is a legal entity B. of separation of ownership and management C. it has limited liability D. none of the above
Limited liability is an important feature of: A. Sole proprietorships B. Partnerships C. Corporations D. All of the above
As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote A. I and II only B. I, II, and III only C. IV only D. I, II, III and IV

The treasurer is usually responsible the following functions of a corporation: I) Tax obligations; II) Investor relationships; III) Cash management; IV) raising new capital A. I only B. I and II only C. II, III and IV only D. I, II, III and IV
The controller usually oversees the following functions of a corporation: I) Preparation of financial statements; II) Internal accounting; III) Cash management and IV) Taxes A. I, II and IV only B. III only C. I and II only D. II and III
The controller is usually responsible for the following functions of a corporation except : I) Preparation of financial statements; II) Internal accounting; III) Cash management; IV) Taxes A. I only B. III only C. I and II only D. IV only
The following are important functions of financial markets: I) Source of financing; II) Provide liquidity; III) Reduce risk; IV) Source of information A. I only B. I and II only C. I, II, III, and IV D. IV only

The Chief Financial Officer (CFO) of a corporation oversees: A. Treasurer's functions B. Controller's functions C. Both A and B D. None of the above
Conflicts of interest between shareholders and managers of a firm result in: A. Principal-agent problem B. Increased agency costs C. Both A and B D. Managers owning the firm
In the principal-agent framework: A. Shareholders are the principals B. Managers are the principals C. Managers are the agents D. A and D
Costs associated with the conflicts of interest between the bondholders and the shareholders of a corporation are called: A. Legal costs B. Bankruptcy costs C. Administrative costs D. Agency costs
Agency costs are incurred by a corporation because: A. managers may not attempt to maximize the value of the firm to shareholders B. shareholders incur monitoring cost C. separation of ownership and management D. all of the above

Which of the following is not a common function of the firm's chief financial officer? A. Hiring CEO B. Hiring controller C. Investing capital D. Paying dividends
Of the following list, which is a stakeholder? I) Employee; II) Customer; III) Community; IV) Supplier A. I, II and IV only B. III only C. I and II only D. All
The following are examples of real assets: I) Machinery; II) Office buildings; III) Warehouse; IV) Common stock A. I, II, and III only B. I and II only C. IV only D. I only
The following are examples of tangible assets except: I) Machinery; II) Office buildings; III) Warehouse; IV) Training for employees A. I only B. I and II only C. IV only D. I, II, and III only
The financial goal of a corporation is to: A. Minimize stockholder wealth B. Maximize profit C. Maximize value of the corporation to the stockholders D. Decrease job security

Managers' actions are monitored by: A. The board of directors B. Commercial banks that have loaned funds to the firm C. The Wall Street analysts D. All of the above
The following are some of the actions shareholders can take if the corporation is not performing well: A. Replace the board of directors in an election. B. Force the board of directors to change the management team. C. Sell their shares of stock in the corporation. D. Any of the above
The idea of "maximizing shareholder value" is widely accepted in: I) U.S.A.; II) U.K; III) Germany; IV) France; V) Japan A. I only B. I and II only C. III, IV and V only D. I, II, III, IV and V
The idea that "firms should be run for stakeholders welfare " is accepted in: I) U.S.A.; II) U.K; III) Germany; IV) France; V) Japan A. I only B. I and II only C. III, IV and V only D. I, II, III, IV and V
The Sarbanes-Oxley Act of 2002 (SOX) was passed largely in response to: A. the corporate accounting scandals of the previous years B. the increase in the budget deficits C. the increase in the trade deficits D. none of the above

The treasurer's responsibilities include preparation of financial statements. True False
In large firms, there is usually a Chief Financial Officer (CFO) who oversees both the treasurer and controller's work. True False
The controller's responsibilities include banking relations and cash management. True False
A firm's overall value belongs entirely to the shareholders. True False
Managers, Shareholders, and lenders of firm have identical information about the value of the firm. True False

Short Answer Questions

Explain the term "corporation."

Briefly explain the term limited liability.
Briefly explain the advantages of a corporation as a form of business organization.
Briefly explain the sequence flow of cash between financial markets and the firm.
Briefly explain the functions of financial markets.

What items of good corporate governance serve to mitigate the tension between owners and managers?
Explain why "maximization of shareholders' wealth" is the appropriate goal of the firm.
Briefly explain some of the institutional arrangements that ensure that managers work toward increasing the value of a firm.
Briefly explain different views taken in different countries about the corporation's goals.

Briefly explain the reasons for enacting the Sarbanes-Oxley Act of 2002.
Briefly explain the advantages and disadvantages of Sarbanes-Oxley Act of 2002 (SOX).
Briefly explain the major provisions of the Sarbanes-Oxley Act of 2002 (SOX).
What are the main purposes of the Sarbanes-Oxley Act of 2002 (SOX).

Mr. Thomas has $100 income this year and zero income next year. The market interest rate is 10% per year. Mr. Thomas also has an investment opportunity in which he can invest $50 this year and receive $80 next year. Suppose Mr. Thomas consumes $50 this year and invests in the project. What will be his consumption next year? A. $ B. $ C. $ D. None of the above
Mr. Dell has $100 income this year and zero income next year. The market interest rate is 10% per year. Mr. Dell also has an investment opportunity in which he can invest $50 this year and receive $80 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the NPV of the investment opportunity? A. $ B. $22. C. $0 (zero) D. None of the above.
Ms. Anderson has $60,000 income this year and $40,000 next year. The market interest rate is 10% per year. Suppose Ms. Anderson consumes $80,000 this year. What will be her consumption next year? A. $60, B. $30, C. $70, D. $18,
The line that connects the maximum that one can consume this year (now) and the maximum one can consume next year: A. Has a slope of (1 + r) B. Has a slope of -(1 + r) C. Has a slope of r D. Has a slope of 1/r

Ms. Newcastle has $60,000 income this year and $40,000 next year. The market interest rate is 10% per year. Suppose Ms. Newcastle wishes to consume $62,000 next year. What will be her consumption this year? A. $60, B. $40, C. $70, D. $19,
Mr. Smith has an income of $40,000 this year and $60,000 next year. He can invest in a project that costs $30,000 this year, which generates an income of $36,000 next year. The market interest rate is 10%. What will be his consumption next year, if Mr. Smith invests in the project and consumes $50,000 this year? A. $40, B. $52, C. $60, D. None of the above

Short Answer Questions

Briefly explain how individuals can adjust their preferences for current and future consumption.

The following are examples of foreign-based corporations except: I) British Petroleum; II) General Electric; III) Sony; IV) Volkswagen A. I only B. II only C. II and III only D. I, II, & IV only

Type: Easy

Shareholders of a corporation may be, among others: I) Individuals; II) Pension Funds; III) Insurance Companies A. I only B. I and II only C. II only D. I, II and III

Type: Medium

Generally, a corporation is owned by the: I) Managers; II) Board of Directors; III) Shareholders A. I only B. II and III C. III only D. I, II and III

Type: Easy

Corporations, potentially, have infinite life because: A. it is a legal entity B. of separation of ownership and management C. it has limited liability D. none of the above

Type: Medium

Limited liability is an important feature of: A. Sole proprietorships B. Partnerships C. Corporations D. All of the above

Type: Easy

As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote A. I and II only B. I, II, and III only C. IV only D. I, II, III and IV

Type: Medium

The following are examples of intangible assets except: A. Building B. Trademarks C. Patents D. Technical expertise

Type: Medium

The following are examples of tangible assets except: A. Machinery B. Factories C. Trademarks D. Offices

Type: Medium

Financial Management Excercise, Exercises of Financial Management

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Chapter 01

Goals and Governance of the Firm