Need to know - three areas/career  opportunities of finance, three alternate forms of business organization, goal of the management is the maximize shareholder’s wealth (which is roughly equivalent to maximizing firm value and or maximizing the value of stock) , relationship between EPS and maximizing shareholder's wealth, In the second part of the chapter, focus on terms and terminology (e.g., Question 1-1), look for word pairs that are opposites (e.g. capital versus money markets), cost of money as both the concept and the formula for the determinants of market interest rates

Note, this chapter has had limited coverage on previous Final Exams, thus the limited selection of questions below. Use the Need to Know above in preparing for this chapter


1. The primary goal for a firm's financial managers is to:
a. Maximize earnings per share.
b. Maximize long run profits.
c. Minimize firm risk.
d. Maximize shareholder wealth.
e. None of the above is the primary goal for a financial manager.

2.  Which of the following is the best description of the goal of the financial manager in a corporation where shares are publicly traded?
     a. maximize earnings per share.
     b. maximize operating income.
     c. maximize the number of outstanding shares.
     d. minimize the riskiness of operating cash flows.
     e. maximize the value of outstanding shares.

 3. The primary goal of a publicly-owned firm interested in serving its stockholders should be to

a. Maximize expected total corporate profit.
b. Maximize expected earnings per share.
c. Minimize the chance of losses.
d. Maximize the value of the firm's equity.
e. Maximize expected net income.

4. The primary goal of a financial manager of a publicly held corporation should be to:

a. Minimize the risk to the shareholders.
b. Maximize the wealth of the firm s owners.
c. Maximize earnings per share.
d. Maximize the growth in annual sales revenue.
e. None of the above.

 5.  According to the text, the primary goal for a firm's managers is to:
   a.  Maximize earnings per share.
   b.  Maximize long run profits.
   c.  Minimize firm risk.
   d.  Increase the firm's asset base.
   e.  None of the above is the primary goal for a financial manager.



1. D, 2. E, 3. D, 4. B, 5. E,  

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