QUESTION 1 INDICATE THE CORRECT ANSWER BY CHOOSING ONE OF THE FOUR OPTIONS A,B,C OR D. 1.1. The primary goal of the financial manager is _____ A. minimising risk. B. maximising profit. C. maximising wealth. D. minimising return. 1.2. Shareholders receive realisable returns through _____ A. earnings per share and cash dividends. B. increase in share price and cash dividends. C. increase in share price and earnings per share. D. profit and earnings per share. 1.3. The wealth of the owners of a company is represented by _____ A. profits. B. earnings per share. C. share value. D. cash flow.
QUESTION 1
INDICATE THE CORRECT ANSWER BY CHOOSING ONE OF THE FOUR OPTIONS A,B,C OR D.
1.1. The primary goal of the
A. minimising risk.
B. maximising profit.
C. maximising wealth.
D. minimising return.
1.2. Shareholders receive realisable returns through _____
A. earnings per share and cash dividends.
B. increase in share price and cash dividends.
C. increase in share price and earnings per share.
D. profit and earnings per share.
1.3. The wealth of the owners of a company is represented by _____
A. profits.
B. earnings per share.
C. share value.
D. cash flow.
1.4. Wealth maximisation as the stated goal of a company implies enhancing the wealth of the _____
A. board of directors.
B. company’s employees.
C. national government.
D. company’s shareholders.
1.5. The goal of profit maximisation would result in prioritising _____
A. cash flows available to shareholders.
B. risk of the investment.
C. earnings per share.
D. timing of the returns.
1.6. Profit maximisation as a goal is not ideal because it does NOT directly consider _____
A. risk and cash flow.
B. cash flow and stock price.
C. risk and earnings per share (EPS).
D. EPS and the share price.
1.7. Profit maximisation as the goal of a company is not ideal because _____
A. profits are only accounting measures.
B. cash flows are more representative of financial strength.
C. profit maximisation does not consider risk.
D. profits today are less desirable than profits earned in future years.
1.8. The key variables in the owner wealth maximisation process are _____
A. earnings per share and risk.
B. cash flows and risk.
C. earnings per share and share price.
D. profits and risk.
1.9. Cash flow and risk are the key determinants in the share price. Increased cash flow results in _____ with other things remaining the same.
A. a lower share price
B. a higher share price
C. an unchanged share price
D. an undetermined share price
1.10. As the risk of a share investment increases, the investor’s _____
A. return will increase.
B. return will decrease.
C. required
D. required rate of return will increase.
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