Financial Management - Study Mode
[#1011] 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.
[#1012] ____________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.
[#1013] __________ 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.
[#1014] 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.
[#1015] According to the _______ model, the dividend decision is irrelevant.
Correct Answer
(A) MM
Explanation
Solution: According to the MM model, the dividend decision is irrelevant. Modigliani and Miller suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company has no effect on the stock price of a company or the company's capital structure.