Finance 330 Essay - 791 Words

1. Generally speaking, the role of the financial manager is to plan for the acquisition and use of funds with the intent to maximize the value of the firm. True 2. The financial manager must execute his or her duties independent of the other departmental and strategic activities of the firm (i.e. in a vacuum) in order to properly maximize the value of the firm. False 3. In a competitive marketplace good ethics is a wonderful idea but an impractical standard. There are simply too few benefits to be gained from maintaining high business ethics. False 4. There is an inverse relationship between bond ratings and the required return on a bond; The required return is lowest for AAA†¦show more content†¦False 11. In accounting, emphasis is placed on determining net income. In finance, the primary emphasis also is on net income because that is what investors use to value the firm. However, a secondary consideration is cash flow because thats what is used to run the business. False 12. The difference between an ordinary annuity and an annuity due is that each of the payments of the annuity due earns interest for one additional year (period). True 13. Compounding is the process of converting todays values, which are termed present value, to future value. False 14. A preemptive right is a provision in the corporate charter or by laws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock. False 15. One of the potential benefits of investing early for retirement is that an investor can receive greater benefits from the compounding of interest. True 16. A call provision gives bondholders the right to demand, or call for, repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates. False 17. Other things held constant, P/E ratios are higher for firms with high growth prospects. 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