Multiple choice

1) According to the agency problem, _________ represent the principals of a corporation. 

A. employees 

B. suppliers 

C. shareholders 

D. managers 

2) Which of the following is NOT a principle of basic financial management? 

A. Risk/return tradeoff 

B. Incremental cash flow counts 

C. Efficient capital markets 

D. Profit is king 

3) Difficulty in finding profitable projects is due to: 

A. social responsibility. 

B. competitive markets. 

C. ethical dilemmas. 

D. opportunity costs. 

4) Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshall's debt ratio. 

A. 30% 

B. 40% 

C. 50% 

D. 60%