Financial Management - Study Mode

[#506] The major problem with the Markowitz model is its_______________.
Correct Answer

(C) complexity

Explanation

Solution: The major problem with the Markowitz model is its complexity. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.

[#507] The long-run objective of financial management is to________.
Correct Answer

(B) maximize the value of the firm's common stock

Explanation

Solution: The long-run objective of financial management is to maximize the value of the firm's common stock. Financial Management is the application of general principles of management to the financial possessions of an enterprise.

[#508] ____________dividend promises to pay shareholders at future date
Correct Answer

(A) Scrip

Explanation

Solution: Scrip dividend promises to pay shareholders at future date. A scrip dividend program is when a company instead of automatically giving their shareholders a cash dividend, gives their shareholders the choice of either receiving a cash dividend or the equivalent in additional shares of the company.

[#509] __________ is concerned with the maximization of a firm's stock price.
Correct Answer

(A) Shareholder wealth maximization

Explanation

Solution: Shareholder wealth maximization is concerned with the maximization of a firm's stock price. The shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners (that is, shareholders) of the firm.

[#510] The Markowitz model assumes most investors are_____________.
Correct Answer

(A) risk averse

Explanation

Solution: The Markowitz model assumes most investors are risk averse. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.