1. Basic objective of Financial Management is
A. Maximization of shareholder's wealth
B. Maximization of profit
C. Ensuring Financial discipline in the firm.
D. All of these.
2. Financial structure refers to
A. Short-term resources.
B. All the financial resources.
C. Long-term resources.
D. All of these.
3. The market value of the firm is the result of
A. Dividend decisions.
B. Working capital decisions.
C. Capital budgeting decisions.
D. Trade-off between risk and return.
4. Which of the following statements is correct regarding profit maximization as the primary goal of the firm?
A. Profit maximization considers the firm's risk level.
B. Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.
C. Profit maximization does consider the impact on individual shareholder's EPS.
D. Profit maximization is concerned more with maximizing net income than the stock
5. Which of the following is not normally a responsibility of the treasurer of the modern corporation but rather the controller?
A. Budgets and forecasts.
B. Asset management.
C. Investment management.
D. Financial management
6. The long-run objective of financial management is to
A. Maximize earnings per share.
B. Maximize the value of the firm's common stock.
Answer (2)
The basic objective of financial management is A. Maximization of shareholder's wealth . This is because financial management aims to increase the value of a firm to its stakeholders by increasing the firm's share price. Maximizing shareholder's wealth is considered as providing long-term value.
Financial structure refers to B. All the financial resources . It encompasses both short-term and long-term resources, considering all of the company's financial assets and how they are structured.
The market value of the firm is the result of D. Trade-off between risk and return . The market value of a firm reflects how well it manages risks in relation to the returns it generates.
The correct statement regarding profit maximization as the primary goal of the firm is D. Profit maximization is concerned more with maximizing net income than the stock . Profit maximization primarily focuses on short-term profits and does not take into account the broader impact on the firm's value or stock.
The responsibility that is more aligned with the controller, rather than the treasurer, is A. Budgets and forecasts . Typically, the controller handles the accounting, financial reporting, and budgeting, while the treasurer manages the company’s investments and finances.
The long-run objective of financial management is to B. Maximize the value of the firm's common stock . This long-term perspective aligns with maximizing shareholder's wealth, ensuring sustainable growth and value over time.
The main objectives of financial management include maximizing shareholder wealth and considering all financial resources. The market value of a firm is determined by the balance of risk and return, while responsibilities are often split between controllers and treasurers. The focus on maximizing the firm's common stock value aligns with long-term financial management goals.
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