Question 1

Determining the best way to raise money to fund a firm's long-term investments is called

Accepted Answer

A)  the capital budgeting decision. 
B)  the portfolio decision. 
C)  the money flow processing decision. 
D)  the capital structure decision. 
A)  the capital budgeting decision. 
B)  the portfolio decision. 
C)  the money flow processing decision. 
D)  the capital structure decision.

Question 2

Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it.If Joe invests and the business loses the lawsuits,the most Joe can lose is

Accepted Answer

A)  $10,000 if Joe is a general partner. 
B)  $10,000 if Joe is a sole proprietor. 
C)  $10,000 if Joe is a limited partner. 
D)  $10,000 plus his share of the lawsuits if Joe is a limited partner. 
A)  $10,000 if Joe is a general partner. 
B)  $10,000 if Joe is a sole proprietor. 
C)  $10,000 if Joe is a limited partner. 
D)  $10,000 plus his share of the lawsuits if Joe is a limited partner.

Question 3

The CEO of JLI Corp.decided to expand into a new market in 2010.At the end of 2010,JLI's stock price had decreased 5% since the beginning of the year.Which of the following statements is MOST correct?

Accepted Answer

A)  The CEO made a poor decision to expand because the stock price decreased during the year. 
B)  The CEO made a poor decision to expand because the company's profits for the year obviously decreased, causing the drop in stock price. 
C)  The CEO's decision may have been optimal, keeping the stock price from falling more than 5% for the year. 
D)  CEO decisions are irrelevant because the efficient market determines the value of a company's stock. 
A)  The CEO made a poor decision to expand because the stock price decreased during the year. 
B)  The CEO made a poor decision to expand because the company's profits for the year obviously decreased, causing the drop in stock price. 
C)  The CEO's decision may have been optimal, keeping the stock price from falling more than 5% for the year. 
D)  CEO decisions are irrelevant because the efficient market determines the value of a company's stock.

Question 4

Which of the following statements best represents the "Agency Problem"?

Accepted Answer

A)  Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders. 
B)  The agency problem results from the separation of management and the ownership of the firm. 
C)  The agency problem may interfere with the implementation of maximizing shareholder wealth. 
D)  all of the above 
A)  Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders. 
B)  The agency problem results from the separation of management and the ownership of the firm. 
C)  The agency problem may interfere with the implementation of maximizing shareholder wealth. 
D)  all of the above

Question 5

While many factors contributed to the financial crisis of 2007 and beyond,it is safe to say that real estate loans were NOT much of a contributing factor.

Accepted Answer

A) True 
 B)False

Question 6

In a limited partnership at least one general partner must exist; that general partner has unlimited liability.

Accepted Answer

A) True 
 B)False

Question 7

Shareholder selection committees select potential board of director nominees ensuring that board members will monitor management sufficiently to protect shareholder interests.

Accepted Answer

A) True 
 B)False

Question 8

Suppose XYZ Corporation is traded on the New York Stock Exchange.XYZ's closing price on Monday is $20 per share.After the market closes on Monday,XYZ makes a surprise announcement that it has obtained a major new customer.XYZ's stock will likely

Accepted Answer

A)  open at $20 per share on Tuesday and then increase as more investors read the announcement in the Wall Street Journal. 
B)  remain at $20 per share because in efficient markets the price already reflects all information. 
C)  open above $20 because the positive news will result in a higher valuation even though the stock has not yet traded. 
D)  open below $20 because the surprise announcement creates more uncertainty. 
A)  open at $20 per share on Tuesday and then increase as more investors read the announcement in the Wall Street Journal. 
B)  remain at $20 per share because in efficient markets the price already reflects all information. 
C)  open above $20 because the positive news will result in a higher valuation even though the stock has not yet traded. 
D)  open below $20 because the surprise announcement creates more uncertainty.

Question 9

Assume that you went to Las Vegas and hit the jackpot for $5 million.Further assume that you were offered a choice to receive the $5 million today,or receive it in two years.According to one of the principles of finance,which would you take?

Accepted Answer

A)  the $5 million in two years because you would be afraid of spending it all right away 
B)  the $5 million in two years because it would be worth more than if you would receive it today 
C)  You would be indifferent as to when you would receive the $5 million. 
D)  the $5 million today because it would be worth more than if you would receive it in two years 
A)  the $5 million in two years because you would be afraid of spending it all right away 
B)  the $5 million in two years because it would be worth more than if you would receive it today 
C)  You would be indifferent as to when you would receive the $5 million. 
D)  the $5 million today because it would be worth more than if you would receive it in two years

Question 10

A corporate treasurer is typically responsible for cash management,credit management,and raising capital.

Accepted Answer

A) True 
 B)False

Question 11

All of the following forms of business organizations provide limited liability to all owners EXCEPT

Accepted Answer

A)  limited liability company. 
B)  S-type corporation. 
C)  corporation. 
D)  limited partnership. 
A)  limited liability company. 
B)  S-type corporation. 
C)  corporation. 
D)  limited partnership.

Question 12

The fundamental goal of a business is to maximize the retained earnings available to the corporation's shareholders.

Accepted Answer

A) True 
 B)False

Question 13

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Accepted Answer

A) True 
 B)False

Question 14

Due to unstable world markets,most large U.S.corporations do almost all of their business in the United States.

Accepted Answer

A) True 
 B)False

Question 15

Assume that an investor is offered a choice of a risk-free government bond or a high-risk corporate stock.Further assume that the expected return is the same for both.According to one of the axioms of finance,which investment would be chosen?

Accepted Answer

A)  the corporate stock 
B)  the government bond 
C)  neither, the investor would be indifferent 
D)  none of the above 
A)  the corporate stock 
B)  the government bond 
C)  neither, the investor would be indifferent 
D)  none of the above

Question 16

An efficient market is one where the prices of the assets traded in that market fully reflect all available information at any instant in time.

Accepted Answer

A) True 
 B)False

Question 17

The true owners of the corporation are the

Accepted Answer

A)  holders of debt issues of the firm. 
B)  preferred stockholders. 
C)  board of directors of the firm. 
D)  common stockholders. 
A)  holders of debt issues of the firm. 
B)  preferred stockholders. 
C)  board of directors of the firm. 
D)  common stockholders.

Question 18

Consider the after-tax cash flows for Project S and Project L:
 
A rational person would prefer ________.

Accepted Answer

A)  Project S because the money can be reinvested sooner 
B)  Project L because they can avoid taxes by receiving cash flows later 
C)  information about profits instead of cash flows 
D)  neither investment over the other 
A)  Project S because the money can be reinvested sooner 
B)  Project L because they can avoid taxes by receiving cash flows later 
C)  information about profits instead of cash flows 
D)  neither investment over the other

Question 19

The risk-return trade-off implies that the return on a riskless asset must be zero.

Accepted Answer

A) True 
 B)False

Question 20

Working capital management is concerned with

Accepted Answer

A)  how a firm can best manage its cash flows as they arise in its day-to-day operations. 
B)  how a firm should raise money to fund its investments. 
C)  what long-term investments a firm should undertake. 
D)  managing a firm's capital stock. 
A)  how a firm can best manage its cash flows as they arise in its day-to-day operations. 
B)  how a firm should raise money to fund its investments. 
C)  what long-term investments a firm should undertake. 
D)  managing a firm's capital stock.

Determining the best way to raise money to fund a firm's long-term investments is called

Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it.If Joe invests and the business loses the lawsuits,the most Joe can lose is

The CEO of JLI Corp.decided to expand into a new market in 2010.At the end of 2010,JLI's stock price had decreased 5% since the beginning of the year.Which of the following statements is MOST correct?

Which of the following statements best represents the "Agency Problem"?

While many factors contributed to the financial crisis of 2007 and beyond,it is safe to say that real estate loans were NOT much of a contributing factor.

In a limited partnership at least one general partner must exist; that general partner has unlimited liability.

Shareholder selection committees select potential board of director nominees ensuring that board members will monitor management sufficiently to protect shareholder interests.

Suppose XYZ Corporation is traded on the New York Stock Exchange.XYZ's closing price on Monday is $20 per share.After the market closes on Monday,XYZ makes a surprise announcement that it has obtained a major new customer.XYZ's stock will likely

Assume that you went to Las Vegas and hit the jackpot for $5 million.Further assume that you were offered a choice to receive the $5 million today,or receive it in two years.According to one of the principles of finance,which would you take?

A corporate treasurer is typically responsible for cash management,credit management,and raising capital.

All of the following forms of business organizations provide limited liability to all owners EXCEPT

The fundamental goal of a business is to maximize the retained earnings available to the corporation's shareholders.

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Due to unstable world markets,most large U.S.corporations do almost all of their business in the United States.

Assume that an investor is offered a choice of a risk-free government bond or a high-risk corporate stock.Further assume that the expected return is the same for both.According to one of the axioms of finance,which investment would be chosen?

An efficient market is one where the prices of the assets traded in that market fully reflect all available information at any instant in time.

The true owners of the corporation are the

Consider the after-tax cash flows for Project S and Project L: A rational person would prefer ________.

The risk-return trade-off implies that the return on a riskless asset must be zero.

Working capital management is concerned with

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 1: An Introduction to the Foundations of Financial Management

Determining the best way to raise money to fund a firm's long-term investments is called

Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it.If Joe invests and the business loses the lawsuits,the most Joe can lose is

The CEO of JLI Corp.decided to expand into a new market in 2010.At the end of 2010,JLI's stock price had decreased 5% since the beginning of the year.Which of the following statements is MOST correct?

Which of the following statements best represents the "Agency Problem"?

While many factors contributed to the financial crisis of 2007 and beyond,it is safe to say that real estate loans were NOT much of a contributing factor.

In a limited partnership at least one general partner must exist; that general partner has unlimited liability.

Shareholder selection committees select potential board of director nominees ensuring that board members will monitor management sufficiently to protect shareholder interests.

Suppose XYZ Corporation is traded on the New York Stock Exchange.XYZ's closing price on Monday is $20 per share.After the market closes on Monday,XYZ makes a surprise announcement that it has obtained a major new customer.XYZ's stock will likely

Assume that you went to Las Vegas and hit the jackpot for $5 million.Further assume that you were offered a choice to receive the $5 million today,or receive it in two years.According to one of the principles of finance,which would you take?

A corporate treasurer is typically responsible for cash management,credit management,and raising capital.

All of the following forms of business organizations provide limited liability to all owners EXCEPT

The fundamental goal of a business is to maximize the retained earnings available to the corporation's shareholders.

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Due to unstable world markets,most large U.S.corporations do almost all of their business in the United States.

Assume that an investor is offered a choice of a risk-free government bond or a high-risk corporate stock.Further assume that the expected return is the same for both.According to one of the axioms of finance,which investment would be chosen?

An efficient market is one where the prices of the assets traded in that market fully reflect all available information at any instant in time.

The true owners of the corporation are the

Consider the after-tax cash flows for Project S and Project L: A rational person would prefer ________.

The risk-return trade-off implies that the return on a riskless asset must be zero.

Working capital management is concerned with

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters