Multiple choice

1) The goal of the firm should be

A. maximization of profits

B. maximization of shareholder wealth

C. maximization of consumer satisfaction

D. maximization of sales

2) An example of a primary market transaction is

A. a new issue of common stock by AT&T

B. a sale of some outstanding common stock of AT&T

C. AT&T repurchasing its own stock from a stockholder

D. one stockholder selling shares of common stock to another individual

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

A. shareholders

B. managers

C. employees

D. suppliers

4) Which of the following is a principle of basic financial management?

A. Risk/return tradeoff

B. Derivatives

C. Stock warrants

D. Profit is king