Questions from Financial Markets

Q: 1. What should be the main goal of a firm?

1. What should be the main goal of a firm? a. Create goods and services sustainably and “be green.” b. Improve the social welfare of our workers. c. Maximize accounting profits as ethically as possib...

Q: 1. What is the principal-agent problem? a

1. What is the principal-agent problem? a. When people are hired to make decisions in the best interests of others b. When agents make incorrect decisions due to inadequate information c. When an em...

Q: 1. A cross-sectional analysis is used for what purpose

1. A cross-sectional analysis is used for what purpose? a. To evaluate a firm’s performance over time b. To compare different firms at the same point in time c. To compare a firm’s ratios against a...

Q: 1. What does the degree of operating leverage measure?

1. What does the degree of operating leverage measure? a. The sensitivity of operating income to a change in sales. b. The sensitivity of operating income to a change in costs. c. The sensitivity o...

Q: 1. Which type of ratio indicates the ability to meet short

1. Which type of ratio indicates the ability to meet short-term obligations to creditors as they mature, or come due? a. Profitability management ratios b. Liquidity ratios c. Market value ratios...

Q: 1. What do asset management ratios indicate? a.

1. What do asset management ratios indicate? a. The quality of a firm’s human resources b. If a firm needs to purchase new trucks or computers c. The efficiency of the use of a firm’s assets to supp...

Q: 1. As defined in the chapter, how is the debt

1. As defined in the chapter, how is the debt to asset ratio computed as follows? a. Total liabilities divided by total assets b. Total assets divided by total debts c. Long-term bond debt divided...

Q: 1. The separation of commercial banking and investment banking activities in

1. The separation of commercial banking and investment banking activities in the U.S. was provided for under the a. Federal Reserve Act of 1913. b. Glass-Steagall Act of 1933. c. Gramm-Leach-Bliley...

Q: 1. Which type of ratio indicates the firm’s ability to generate

1. Which type of ratio indicates the firm’s ability to generate returns on its sales, assets, and equity? a. Profitability management ratios b. Liquidity ratios c. Financial leverage ratios d. Pro...

Q: 1. What do market value ratios tell managers about the financial

1. What do market value ratios tell managers about the financial market's view of a firm? a. How investors value a firm relative to financial statement values b. How the market value of assets compar...