Question

1. The primary goal of financial management is most associated with increasing the a. dollar amount of each sale. b. traffic flow within the firm's stores c. the fixed costs while lowering the variable costs. d. firm's liquidity e. market value of the firm. 2. Which form of corporate business structure is the least likely to have governance problems? a. sole proprietorship b. partnership c. limited corporate partner d. corporation What is the primary purpose for establishing a board of directors? a. it's a government regulation required in most countries b. to assure management is well compensated c. to bring in expertise from competitors 3. d. to serve the best interests of the outside sharcholders 4. Excellent Codes of Corporate Governance have what common traits? a. they address core conflicts of interest between managers and owners b. they must include the number of members of the board of directors c. they establish corporate office hours d. they establish management compensation policies 5. Suppose you expect receiving $5,000 three years from today, and The interest rate is 5 percent each year. What's the present value of it ? a. $5,000 b. $4.319 c. $5,788

Answer 1

1. Option e. market value of the firm

Primary goal of a financial management is to increase the current value per share of the company, hence to increase the firm's market value should be the priority.

2. Option a. sole proprietorship

In sole proprietorship there is no clash of interest between two parties hence is suppose to have the least governance issues.

3. Option d. to serve the best interest of the outside shareholders

The primary function of any board of directors is to create shareholder wealth or value. This is done through various corporate actions and by establishing strategies and goals for the company.

4. Option a. they address core conflicts of interest between managers and owners.

Codes of Corporate Governance deals with transparency of all the information to owners as well as maintaining ethics and fairness of their activities towards the owners or stockholders .

5. Option b. $4319

Given

Future value of an investment FV = 5000

Time of investment N = 3

Interest rate = 5%

Present value of this future amount is calculated as follows

PV = Fv / ( 1+ r) ^N

PV = 5000 / ( 1 + 0.05) ³

PV = 5000 / 1.157625

PV = $4319

Option b.    $4319