Question

1. It is important to evaluate all financial decisions by measuring how they affect a firm’s stock price, hence ensuring maximization of shareholder wealth.

True

False 

2. One advantage of organized stock exchanges is increased stock price volatility resulting from the efficient exchange of pricing information.

True

False 

3. Real assets are tangible, whereas financial assets merely reflect claims for future payment on other economic units.

True

False 

4. If two companies have the same revenues and operating expenses, their net incomes will still be different if one company finances its assets with more debt and the other company with more equity.

True

False 

5. If a company’s cash balance increases during the year, and the company also reports positive net income, then the company’s retained earnings balance must increase.

True

False