Question

1.

The function of financial markets and institutions is:

to create economical booms and recessions.

to facilitate the flow of funds through the economy.

to manage portfolios of investors.

to look at decisions in firms from the financial manager's point of view.

2. Investments is taught from:

• the corporation's point of view.
• the investor's point of view.
• the portfolio manager's point of view.
• the market's point of view.

3. The appropriate goal of financial managers is to maximize

• shareholder wealth
• profits
• the firm's earnings per share
• all of the above

4.

Which of the following business entities is subject to double taxation?

All of the above

Corporation.

Partnership.

LLC.

Answer 1

Ans: 1) Function of financial institutions and market is :

to facilitate the flow of funds through the economy by providing debt and equity instruments to the stakeholders.

2) Investment is taught from : investors point of view, based on his goals, age, financial position etc.

3) The appropriate goal of financila managers is to maximize shareholders wealth, profits ( as maximizing profit would increase shareholders wealth), and Earnings per share is also calculated on shareholders wealth per share basis. All the above

4) Corporation is subject to double taxation , as profits of corporation is taxable and when it is paid as dividend , it is again taxable.

Partnership and LLC are structures to avoid double taxation, as in partnership the profits are distributed among the partners which is taxable and there is no other tax. LLC also acts like partnership