1. In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with stockholder interests. True

2. If a bond is callable, and if interest rates in the economy decline, then the company can sell a new issue of low-interest-rate bonds and use the proceeds to "call" the old bonds in and have effectively refinanced at a lower rate. True

3. Risk really should not be a significant factor when making financial decision because all business decisions involve predictions about the future, which is unknown. As a result, all decisions automatically include some consideration of risk.
False

4. All else equal, a dollar received sooner is worth more than a dollar received at some later date, because the sooner the dollar is received the more quickly it can be invested to earn a positive return.
True
5. Current cash flow from existing assets is highly relevant to the investor. However, the value of the firm depends primarily upon its growth opportunities. As a result, profit projections from those opportunities are the only relevant future flows with which investors are concerned.
False

6. Determining whether a firm's financial position is improving or deteriorating requires analysis of more than one set of financial statements. Trend analysis is one method of measuring a firm's performance over time. True

7. A firm’s net income reported on its income statement must equal the operating cash flows on the statement of cash flows.
False
8. The Securities Exchange Commission is the U.S. government agency that regulates the issuance and trading of stocks and bonds.
True
Compounding is the process of converting today's values, which are