Test Bank For Foundations of Financial Management 11th Canadian Edition By Stanley B. Block

Chapter 01

The Goals and Functions of Financial Management

Multiple Choice Questions

1. What is the primary goal of financial management?
   A.Increased earnings
   B. Maximizing cash flow
   C. Maximizing shareholder wealth
   D. Minimizing risk of the firm

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-03 Examine the primary goal of finance as the maximization of shareholder wealth as measured by share price.
Topic: 01-06 Goals of Financial Management

2. Proper risk-return management means that:
   A.the firm should take as few risks as possible.
   B. consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined.
   C. the firm should earn the highest return possible.
   D. the firm should value future profits more highly than current profits.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-03 Examine the primary goal of finance as the maximization of shareholder wealth as measured by share price.
Topic: 01-07 Maximizing Shareholder Wealth

3. Which of the following is not a major area of concern and emphasis in modern financial management and in this text?
   A.Inflation and its effect on profits
   B. Stable short-term interest rates
   C. Changing international environment
   D. Increased reliance on debt

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-02 Identify the analysis and decision-making nature of finance while considering return and risk.
Topic: 01-05 A Discipline Used by Financial Managers

4. Which of the following is not a major area of concern and emphasis in modern financial management and in this text?
   A.Marginal analysis
   B. Risk-return trade-off
   C. Commodity trading
   D. Changing financial institutions

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-02 Identify the analysis and decision-making nature of finance while considering return and risk.
Topic: 01-05 A Discipline Used by Financial Managers

5. Some of the effects of high inflation are:
   A.the gold standard was eliminated.
   B. purchasing power increased.
   C. interest rates fall.
   D. Phantom profits and undervalued assets.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-06 Outline the role of financial markets in allocating capital; determining value; and establishing yields.
Topic: 01-17 Allocation of Capital