Question 1

The purchasing power of money increases over time as a result of ____________.

Accepted Answer

inflation

Question 2

Which of the following is not one of the three major types of business structures in Australia:

Accepted Answer

A) dealership. 
B) sole proprietorship. 
C) limited liability company. 
D) partnership. 
A) dealership. 
B) sole proprietorship. 
C) limited liability company. 
D) partnership. A

Question 3

When formulating financial policy,managers also have to consider the appropriate balance between:

Accepted Answer

A) receivables and payables. 
B) interim and final dividends. 
C) short-term and medium-term finance. 
D) short-term and long-term finance. 
A) receivables and payables. 
B) interim and final dividends. 
C) short-term and medium-term finance. 
D) short-term and long-term finance. D

Question 4

Maximising the value of the firm can also be described as:

Accepted Answer

A) maximising the value of the company's ordinary shares. 
B) maximising the accounting profit of the firm. 
C) minimising the interest rate charged by creditors of the firm. 
D) maximising sales revenue or turnover of the firm. 
A) maximising the value of the company's ordinary shares. 
B) maximising the accounting profit of the firm. 
C) minimising the interest rate charged by creditors of the firm. 
D) maximising sales revenue or turnover of the firm.

Question 5

The concept of investors being risk averse means that:

Accepted Answer

A) investors will always prefer an investment that carries less risk. 
B) investors require higher returns to compensate for carrying more risk. 
C) the investment's risk is the predominant feature considered by the investor. 
D) investors will make all possible attempts to avoid systematic risk. 
A) investors will always prefer an investment that carries less risk. 
B) investors require higher returns to compensate for carrying more risk. 
C) the investment's risk is the predominant feature considered by the investor. 
D) investors will make all possible attempts to avoid systematic risk.

Question 6

Shareholders in a company have limited liability,which means that:

Accepted Answer

A) shareholders can be called upon to contribute only the amount unpaid on shares held in the company. 
B) the maximum the shareholders can be called upon to contribute is the current market price of the shares. 
C) shareholders can never be called upon to make an additional contribution to the company's assets. 
D) shareholders have little or limited interest in the activities of management of the company,because the management and ownership of the firm are separated. 
A) shareholders can be called upon to contribute only the amount unpaid on shares held in the company. 
B) the maximum the shareholders can be called upon to contribute is the current market price of the shares. 
C) shareholders can never be called upon to make an additional contribution to the company's assets. 
D) shareholders have little or limited interest in the activities of management of the company,because the management and ownership of the firm are separated.

Question 7

The market value of a company is calculated as the sum of the net assets and owners equity on the company's balance sheet:

Accepted Answer

A) True 
 B)False

Question 8

Which of the following does not represent a financing activity of a company?

Accepted Answer

A) Organising the project funding for specific investments. 
B) Managing the cash flows and short-term investments of the company. 
C) Organising the funding of the general operations of the company. 
D) Undertaking the accounting and annual reporting activities of the company. 
A) Organising the project funding for specific investments. 
B) Managing the cash flows and short-term investments of the company. 
C) Organising the funding of the general operations of the company. 
D) Undertaking the accounting and annual reporting activities of the company.

Question 9

The principal role of a company's financial manager is:

Accepted Answer

A) to undertake the company's accounting and financial reporting activities. 
B) to obtain the funds necessary for the capital budget and make sure they are used effectively. 
C) to provide advice to the Board of Directors on the company's profitability. 
D) none of the given options. 
A) to undertake the company's accounting and financial reporting activities. 
B) to obtain the funds necessary for the capital budget and make sure they are used effectively. 
C) to provide advice to the Board of Directors on the company's profitability. 
D) none of the given options.

Question 10

Partnerships are a common form of business entity for small service businesses because:

Accepted Answer

A) they provide legal protection for the proprietor from the creditors of the firm. 
B) they are ideal for where the business is owned by one person. 
C) there are no legal requirements that need to be met to form a partnership. 
D) they allow the company to buy,own and sell property. 
A) they provide legal protection for the proprietor from the creditors of the firm. 
B) they are ideal for where the business is owned by one person. 
C) there are no legal requirements that need to be met to form a partnership. 
D) they allow the company to buy,own and sell property.

Question 11

Corporate decisions include:

Accepted Answer

A) investment decisions. 
B) financing decisions. 
C) dividend decisions. 
D) all of the given options. 
A) investment decisions. 
B) financing decisions. 
C) dividend decisions. 
D) all of the given options.

Question 12

The issuance of ordinary shares is normally:

Accepted Answer

A) a financing decision made by managers. 
B) an investment decision made by managers. 
C) a dividend decision made by managers. 
D) both a financing decision made by managers and an investment decision made by managers. 
A) a financing decision made by managers. 
B) an investment decision made by managers. 
C) a dividend decision made by managers. 
D) both a financing decision made by managers and an investment decision made by managers.

Question 13

The concept of market efficiency embodies the idea that:

Accepted Answer

A) investors want to be compensated with higher returns for all the unsystematic risk they bear,and expect prices to adjust in an instantaneous and unbiased way. 
B) all investors are fully informed about the potential returns for a given firm,and therefore the share price is a fair representation. 
C) share prices respond to new information in a way that is both unbiased and instantaneous. 
D) because holders of debt do not share in the high returns in good economic periods,they require a higher rate of return relative to the risk they bear. 
A) investors want to be compensated with higher returns for all the unsystematic risk they bear,and expect prices to adjust in an instantaneous and unbiased way. 
B) all investors are fully informed about the potential returns for a given firm,and therefore the share price is a fair representation. 
C) share prices respond to new information in a way that is both unbiased and instantaneous. 
D) because holders of debt do not share in the high returns in good economic periods,they require a higher rate of return relative to the risk they bear.

Question 14

The interest rate quoted in the financial markets for borrowing and lending transactions is the:

Accepted Answer

A) real interest rate. 
B) prime lending rate. 
C) nominal interest rate. 
D) cash rate. 
A) real interest rate. 
B) prime lending rate. 
C) nominal interest rate. 
D) cash rate.

Question 15

The concept of market efficiency means that we should expect securities and other assets to be:

Accepted Answer

A) underpriced given their expected risks and returns. 
B) overpriced given their expected risks and returns. 
C) fairly priced given their expected risks and returns. 
D) none of the given options is correct as prices cannot be predicted. 
A) underpriced given their expected risks and returns. 
B) overpriced given their expected risks and returns. 
C) fairly priced given their expected risks and returns. 
D) none of the given options is correct as prices cannot be predicted.

Question 16

A company is a separate legal entity formed under the _______________.

Accepted Answer

Corporatio

Question 17

It is better to receive a sum of money next year than to receive the same amount today:

Accepted Answer

A) True 
 B)False

Question 18

Compared with other forms of business structure,a ___________ is subject to the most onerous regulation.

Accepted Answer

The answer of Compared with other forms of business structure,a...

Question 19

Which of the following statements is a disadvantage of a sole proprietorship?

Accepted Answer

A) The taxation treatment of partnerships can be a disadvantage. 
B) It is more expensive to establish than a company. 
C) It can be difficult to raise funds for expansion. 
D) There are more regulatory requirements than a company. 
A) The taxation treatment of partnerships can be a disadvantage. 
B) It is more expensive to establish than a company. 
C) It can be difficult to raise funds for expansion. 
D) There are more regulatory requirements than a company.

Question 20

The concept of arbitrage involves:

Accepted Answer

A) buying a share and selling it later when it increases in value 
B) simultaneous transactions in different markets that result in an immediate risk-free profit. 
C) agreeing on a price to buy or sell a security for in the future. 
D) buying a higher quality good for a cheaper price than is offered for a similar lower quality item. 
A) buying a share and selling it later when it increases in value 
B) simultaneous transactions in different markets that result in an immediate risk-free profit. 
C) agreeing on a price to buy or sell a security for in the future. 
D) buying a higher quality good for a cheaper price than is offered for a similar lower quality item.

Exam 1: Introduction

The purchasing power of money increases over time as a result of ____________.

Which of the following is not one of the three major types of business structures in Australia:

When formulating financial policy,managers also have to consider the appropriate balance between:

Maximising the value of the firm can also be described as:

The concept of investors being risk averse means that:

Shareholders in a company have limited liability,which means that:

The market value of a company is calculated as the sum of the net assets and owners equity on the company's balance sheet:

Which of the following does not represent a financing activity of a company?

The principal role of a company's financial manager is:

Partnerships are a common form of business entity for small service businesses because:

Corporate decisions include:

The issuance of ordinary shares is normally:

The concept of market efficiency embodies the idea that:

The interest rate quoted in the financial markets for borrowing and lending transactions is the:

The concept of market efficiency means that we should expect securities and other assets to be:

A company is a separate legal entity formed under the _______________.

It is better to receive a sum of money next year than to receive the same amount today:

Compared with other forms of business structure,a ___________ is subject to the most onerous regulation.

Which of the following statements is a disadvantage of a sole proprietorship?

The concept of arbitrage involves:

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

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