Chapter 1 - Financial decision making

Wealth is:
1. The capacity to consume
2. Money in the bank
3. Having more money than somebody else
4. Owning lots of assets
Profit and income are:
1. Different because profit tells us how well a business is doing
2. Different because profit relates to companies
3. Different because profit relates to companies
4. Different because profit is an accounting number based on the past but income is an economic concept based on capacity to consume
Which of the following statements is NOT true
1. Maximisation of dividends over time maximises the stock market value of a company
2. Maximising the stock market value of a company maximises shareholder wealth
3. Managers should seek to maximise company profits
4. Managers should seek to maximise dividends over time
Which of the following is NOT a necessary condition for making an economic decision
1. The ability to value the alternatives
2. The existence of an economic objective
3. The existence of alternatives
4. Knowledge of the outcome of the decision
The objective of an economic decision should be:
1. The maximisation of shareholder wealth
2. The maximisation of directors' remuneration
3. The maintenance of high moral values
4. The preservation of the environment
We assume that shareholders invest in companies primarily in order to
1. Make profits
2. Have a say in the running of the business
3. Protect their investments
4. Increase their wealth through the generation of cash flows