27) Which of the following is true of cash flows and risk?
A) Low cash flow and low risk result in an increase in share price.
B) High cash flow and low risk result in an increase in share price.
C) High cash flow and high risk result in an increase in share price.
D) Lo cash flow and high risk result in an increase in share price.
28) As the risk of a stock investment increases, investors’ ________.
A) return will increase
B) return will decrease
C) required rate of return will decrease
D) required rate of return will increase
29) If the CEO of a company were to pass away, what do you think would happen to price of the stock?
A) It would decrease because of the perceived increased risk due of lack of near-term leadership.
B) It would increase because of the perceived increased risk due of lack of near-term leadership.
C) It would decrease because of the perceived decreased risk due of lack of near-term leadership.
D) It would increase because of the perceived decreased risk due of lack of near-term leadership.
30) Which of the following is true of a cash flow?
A) Profits do not necessarily result in cash flows available to the stockholders.
B) It is guaranteed that the board of directors will increase dividends when net cashflows increase.
C) A firm’s income statement will never show a positive profit when its cash outflows exceed its cash inflows.
D) An increase in revenue will always result in an increase in cash flow.
31) A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.
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Based on the wealth maximization goal, the financial manager would choose ________.
A) Asset 1
B) Asset 2
C) Asset 3
D) Asset 4
32) A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would ________.
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A) choose Asset 1
B) choose Asset 2
C) choose Asset 3
D) be indifferent between Asset 1 and Asset 2
33) Which of the following is true of stakeholders?
A) They are the owners of a firm.
B) They are groups to whom a firm has financial obligations.
C) They are groups having a direct economic link to a firm.
D) They include only the bondholders, common stockholders, and preferred stockholders
34) Which of the following is an example of a firm’s stakeholder?
A) suppliers
B) Federal reserve
C) media
D) competitors