Multiple choice

1. Which of the following statements best represents what finance is about?              

a.     How political, social, and economic forces affect corporations

b.     Maximizing profits

c.     Creation and maintenance of economic wealth

d.     Reducing risk

2. 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.

3. Consider the timing of the profits of the following certain investment projects:       

                               Profit

                          L             S

Year 1             $0          $3000

Year 2            $3000       $0

a.     Project S is preferred to Project L.

b.     Project L is preferred to Project S.

c.     Projects S and L are equally desirable.

d.     A goal of profit maximization would favor Project S only.

4. Which of the following best describes the goal of the firm?                

a.     The maximization of the total market value of the firm’s common stock

b.     Profit maximization

c.     Risk minimization

d.     None of the above