10 May WHICH OF THE FOLLOWING STATEMENTS CONCERNING A FIRM’S QUEST TO MAXIMIZE WEALTH IS CORRECT?
1) The extent to which the operating income can decline before a firm is unable to meet its annual interest costs can be found in:a. ?the fixed charge coverage ratio.b. ?the debt ratio.c. ?the times-interest-earned ratio.d. ?the return on equity.e. ?the profit margin.2) ?Techniques employed by firms to make their financial statements look better than they actually are are called:a. ?DuPont techniques.b. ?window-dressing techniques.c. ?trend analysis techniques.d. ?benchmarking.e. ?equity multipliers.3) Which of the following statements concerning a firm’s quest to maximize wealth is correct??a. ?In extremely competitive industries we would expect firms would voluntarily engage in many socially beneficial projects to try to maximize their stocks’ values.b. ?Actions that maximize a firm’s stock price are inconsistent with maximizing social welfare.c. ?The concepts of social responsibility and ethical responsibility on the part of corporations are completely different and neither is relevant in maximizing stock price.d. ?In a competitive market if a group of firms does not spend resources making social welfare improvements but another group does in general this will not affect the second group’s ability to attract funds.e. ?If the government did not mandate socially responsible corporate actions such as those relating to product safety and fair hiring practices most firms in competitive markets probably would not pursue such policies voluntarily.4) At the financial control phase a firm is concerned with:?a. ?the amount of funds generated internally.b. ?determining how much money it will need during a given period.c. ?determining its financial breakeven point.d. ?the degree of financial leverage that is acceptable.e. ?implementing financial plans and dealing with feedback.5) Which of the following statements is correct?a. Financial institutions in other countries generally are less regulated than in the United States.b. One reason domestic firms “go global” is to sell products in saturated markets.c. Often firms can avoid regulatory hurdles that apply to foreign manufacturers by establishing manufacturing units in the country where the hurdles apply.d. One of the advantages associated with doing business in international markets is that all countries report their financial statements in the US dollar.e. Cultural differences among countries gives advantage to a multinational firm to use the same marketing strategy that is packaging advertising and so forth in every country in which it operates.
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