Profit maximization is NOT an adequate goal of the firm when making financial decisions because: A) it does not necessarily reflect shareholder wealth maximization. B) it ignores the risk inherent in different projects that will generate the profits. C) it can over-emphasize a project’s short-term returns. D) All of the above. ANSWER D
One benefit payable under a typical no-fault plan is “essential services expenses.” Which of the following would be covered under this benefit? A) funeral expenses B) housekeeping expenses C) hospital bills D) loss of income ANSWER Answer: B
“No pay, no play” laws have which of the following characteristics? A) Uninsured motorists are prevented from suing for noneconomic damages. B) Recovery by accident victims is limited to the amount of liability coverage that they have purchased. C) Driving privileges are automatically terminated if the vehicle operator is stopped by the police and does […]
The residual market for auto insurance is designed to provide insurance to A) superior risks who qualify for substantial discounts. B) owners of vintage/antique autos where the replacement cost far exceeds the actual cash value. C) drivers who are unable to obtain coverage in the standard market. D) businesses that need to insure a fleet […]
Liquidity refers to the ability to quickly convert an asset into cash without lowering the selling price. Indicate whether the statement is true or false ANSWER TRUE
In measuring value, the firm’s focus should be on: A) cash flow. B) accounting profits. C) time value of money. D) earnings per share. ANSWER A
The “perfect storm” of factors that contributed to the economic crisis of 2007 include A) agency costs, inefficient markets, and perfect capital markets. B) poorly chosen mortgage loans, falling housing prices, and a contracting economy. C) financial deregulation, unchecked commodity prices, floating currency exchange rates. D) increases in the minimum wage rate, unchecked illegal immigration, […]
Which of the following conclusions would be true if you earn a higher rate of return on your investments? A) The greater the present value would be for any lump sum you would receive in the future. B) Your rate of return would not have any effect on the present value of any sum to […]
Amber believes that her auto insurance premium is too high. Which of the following would most likely lower Amber’s premium? A) Amber could increase her physical damage deductible. B) Amber could move from the rural area where she lives to an urban or suburban area. C) Amber could increase the amount of liability insurance that […]
Which of the following goals of the firm are synonymous with the maximization of shareholder wealth? A) Profit maximization B) Risk minimization C) Maximization of the total market value of the firm’s common stock D) None of the above ANSWER C
