20 Questions
What is the primary purpose of investment decisions in finance?
To allocate money to maximize its value
Which principle states that ethical dilemmas are prevalent in finance?
Principle 10
What is the impact of diversification on risk according to Principle 9?
It can diversify away some risk
What do financing decisions revolve around in finance?
Determining how the assets will be financed
What are asset management decisions concerned with?
How, when, where and how much money will be spent on investment opportunities
What is the primary goal of the firm?
Maximization of Shareholder Wealth
What is the term for the behavior of principals and their agents in a firm, as mentioned in the text?
Agency Theory
In the context of financial decision-making, what is the best type of financing according to the text?
Mixing debt and equity
What is the main responsibility of management in a modern organization, based on the text?
Acting as an agent for the owners (shareholders)
What does Shareholders' wealth encompass?
Current and future profits and EPS; the timing, duration, and risk of profits; dividend policy; and all other relevant factors
Risk can be completely diversified away, leaving no risk at all
False
According to Principle 10, ethical behavior is subjective and varies from person to person
True
Investment decisions are focused on how to allocate money to maximize its value
True
Financing decisions revolve around how to pay for investments and expenses
True
Asset management decisions concern how to finance the assets of a firm
False
Debt financing always involves risk for the company
True
The modern organization implies a separation between shareholders and management
True
Social responsibility is a primary focus of agency theory in finance
False
Maximizing sales or market share is a general goal of the firm
True
The real goal of the firm according to the text is to maximize shareholder wealth
True
Test your knowledge of finance principles and ethical dilemmas in this quiz. Explore topics such as risk diversification, measuring project or asset risk, and ethical behavior in finance.
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