SECTION A 1. Which of the following terms is defined as the mixture of a firm's debt and equity financing? A. Working capital management B. Cost of analysis C. Capital budgeting D. Capital structure 2. Which of the following is an agency cost? A. Accepting an investment opportunity that will add value to the firm B. increasing the quarterly dividend C. investing in a new project that creates firm value D. hiring outside accountants to audit the company's financial statement 3. The goal of a financial manager of a publicly traded corporation should be for: A. Maximize profit B. Maximize cash flow from operating activities C. Maximize the wealth of the shareholder D. Minimize the risk of investing in the firm. 4. A firm's investment decision is also called the: A. Financing decision. B. Capital budgeting decision. C. Capital structure decision. D. None of the above. 5. Conflicts of interest between shareholders and managers of firm result in: A. Principal-agent problem B. Increased agency cost C. Both A and B D. None of the above 6. In the principal-agent framework; A. Shareholders are the principal B. Managers are the agents C. Shareholders are the agents D. A and B Universny of Professional Studue, Acera P. O. Box LG 149, Acci a Graduate Library ge 1 of 10

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.