Question 1

Industrial groups are organisations comprised of companies in different industries with common ownership interests, which include firms necessary to sell and manufacture products.

Accepted Answer

This is the definition of industrial groups.

Question 2

The primary goal of a publicly-owned firm interested in serving its shareholders should be to

Accepted Answer

Maximising the stock price per share is the most appropriate goal for a publicly-owned firm interested in serving its shareholders, as it reflects the value of the firm in the market and increases the wealth of shareholders. Minimising debt, chances of losses, and maximising net income are important factors, but they are not the primary goal of a publicly-owned firm. Maximising expected EPS may not always result in maximising the stock price per share, as EPS can be manipulated through accounting practices.

Question 3

Which of the following is a reason why companies move into international operations?

Accepted Answer

All of the choices listed are valid reasons for companies to move into international operations. Companies may seek to take advantage of lower production costs in regions with inexpensive labor, develop new markets and expand their customer base, and locate important raw materials abroad to improve their supply chain and operational efficiency.

Question 4

Which of the following statements is correct?

Accepted Answer

The bylaws contain procedures for electing corporate directors, while the corporate charter declares the activities that the firm will pursue and the number of directors. The corporate bylaws are not drawn up by the state, but by the company itself. Procedures for changing the bylaws are also contained in the bylaws, not the corporate charter. While both the charter and bylaws are important documents for a company, both are legally required to be filed with the secretary of state for a company to be in official existence.

Question 5

Everything else equal, including firm size, rand sales, type of product sold, and so forth, the primary difference between the proprietorship and partnership business forms is that

Accepted Answer

The primary difference between a proprietorship and a partnership is the number of owners. A proprietorship has one owner, while a partnership has two or more owners.

Question 6

Which of the following statements is correct?

Accepted Answer

The riskiness of projected EPS depends upon how the firm is financed, as the use of debt financing can increase the firm's financial risk and affect its ability to meet its financial obligations, leading to fluctuations in EPS. A is incorrect because the optimal dividend policy should balance the interests of both shareholders and the company's financial needs. B is incorrect as the use of debt financing can affect EPS and share price by increasing financial leverage. D is incorrect as the timing of earnings can also affect share price, such as if the earnings are expected to grow in the future or if they are subject to fluctuations. E is incorrect as dividend policy is ultimately determined by the company's board of directors, who must consider the interests of shareholders but also other factors such as the company's financial objectives and capital needs.

Question 7

Which of the following mechanisms is not used by shareholders to get managers to act in shareholder's best interests?

Accepted Answer

The golden parachute is a mechanism by which managers may receive large payouts if the company is taken over, often incentivizing them to resist the takeover and act against the interests of shareholders. Therefore, this mechanism is not used by shareholders to get managers to act in their best interests.

Question 8

The primary goal of a financial manager should be to __________.

Accepted Answer

The primary goal of a financial manager should be to maximise the value of the firm's shares. This means increasing the wealth of shareholders by making wise investment decisions and generating profits. While minimising operating costs, interest payments, and tax payments are important considerations, they should be balanced with the goal of maximising shareholder value. Maximising operating income is also not the primary goal, as it may involve risky decisions that could harm the long-term prospects of the firm.

Question 9

The corporate charter is a document filed with the secretary of the state in which the firm is incorporated that provides information about the company, including its name, address, directors, and amount of capital shares.

Accepted Answer

This statement is true.

Question 10

Which of the following statements is correct?

Accepted Answer

There are indeed more partnerships and sole proprietorships than companies, but companies typically produce more goods and services due to their larger scale and resources.

Question 11

Which of the following actions is consistent with social responsibility but is necessarily inconsistent with shareholder wealth maximisation?

Accepted Answer

The answer of Which of the following actions is consistent...

Question 12

Which of the following statements is correct?

Accepted Answer

Companies have limited liability and ease of ownership transfer, which makes it easier for them to raise money in financial markets compared to other organizational forms.

Question 13

Which of the following statements is correct?

Accepted Answer

Partnerships often face challenges in attracting capital due to disadvantages such as the impermanence of the organization and unlimited liability, which can deter investors.

Question 14

Managers of firms using accounting manipulations to inflate current earnings are likely to generate long-term benefits to the shareholders of the firm.

Accepted Answer

Managers who use accounting manipulations to inflate current earnings may provide short-term benefits to shareholders by boosting the stock price or increasing dividends, but these benefits are often temporary and can have detrimental effects on the long-term health of the company. Over time, these practices can erode investor trust and damage the reputation of the firm, leading to decreased shareholder value in the future. Additionally, such practices are illegal and can result in legal and financial penalties for the company and its directors.

Question 15

Having the manager's compensation tied to the company's performance increases the agency problem that companies face.

Accepted Answer

Tying a manager's compensation to company performance can align the manager's interests with those of the shareholders, potentially reducing the agency problem.

Question 16

Which of the following should be the primary goal pursued by the financial manager of a firm?

Accepted Answer

The primary goal of a financial manager should be to maximise the market value of the firm's stock or the wealth of shareholders. This aligns the interests of the manager with those of the firm's owners, and ensures that the manager is making decisions that will increase the long-term value of the firm. Maximising net income, maximising the firm's net worth, maximising dividends, and minimising expenses may all be important goals, but they should be secondary to the goal of maximising the market value of the firm's stock.

Question 17

Which of the following statements about the company form of business organisation is incorrect?

Accepted Answer

The company is not the easiest form of business organization to establish. It requires significant legal and regulatory requirements such as registration with the Companies and Intellectual Property Commission (CIPC), appointment of a board of directors, issuance of shares, and compliance with various laws and regulations.

Question 18

A proprietorship is an unincorporated business owned by one individual and the owner benefits from the limited liability for business which limits his losses to what he has invested in the company.

Accepted Answer

A proprietorship does not offer limited liability protection to the owner, meaning the owner is personally responsible for all debts and obligations of the business.

Question 19

Which of the following is an example of an area of business where use of "questionable" ethics is considered a necessity?

Accepted Answer

It is not ethical or necessary to use "questionable" ethics in any area of business. In fact, practicing ethical behavior should be a priority in all aspects of business operations. Acting with integrity and ethical standards not only promotes a positive reputation but also attracts and retains customers, employees, and partners who value ethical behavior. Any short-term gains achieved through unethical practices can lead to long-term consequences and damage to the business's reputation and success.

Question 20

Which of the following statements is correct?

Accepted Answer

Shareholder agency costs include the opportunity costs associated with constraining managerial freedom, but managerial salaries are not considered agency costs.

Quiz 1: An Overview of Managerial Finance

Industrial groups are organisations comprised of companies in different industries with common ownership interests, which include firms necessary to sell and manufacture products.

The primary goal of a publicly-owned firm interested in serving its shareholders should be to

Which of the following is a reason why companies move into international operations?

Which of the following statements is correct?

Everything else equal, including firm size, rand sales, type of product sold, and so forth, the primary difference between the proprietorship and partnership business forms is that

Which of the following statements is correct?

Which of the following mechanisms is not used by shareholders to get managers to act in shareholder's best interests?

The primary goal of a financial manager should be to __________.

The corporate charter is a document filed with the secretary of the state in which the firm is incorporated that provides information about the company, including its name, address, directors, and amount of capital shares.

Which of the following statements is correct?

Which of the following actions is consistent with social responsibility but is necessarily inconsistent with shareholder wealth maximisation?

Which of the following statements is correct?

Which of the following statements is correct?

Managers of firms using accounting manipulations to inflate current earnings are likely to generate long-term benefits to the shareholders of the firm.

Having the manager's compensation tied to the company's performance increases the agency problem that companies face.

Which of the following should be the primary goal pursued by the financial manager of a firm?

Which of the following statements about the company form of business organisation is incorrect?

A proprietorship is an unincorporated business owned by one individual and the owner benefits from the limited liability for business which limits his losses to what he has invested in the company.

Which of the following is an example of an area of business where use of "questionable" ethics is considered a necessity?

Which of the following statements is correct?