Question 1

A major advantage of the company form of business structure is that:

Accepted Answer

A)  directors are personally liable under the Corporations Act 2001. 
B)  shareholders have limited liability for company debts. 
C)  employees are personally liable under the Corporations Act 2001. 
D)  all of the above.

Question 2

Financial markets include:

Accepted Answer

A)  bond market. 
B)  cash market. 
C)  share market. 
D)  all of the above.

Question 3

Share prices are affected by:

Accepted Answer

A)  The business environment. 
B)  Management decisions. 
C)  Economic shocks. 
D)  all of the above.

Question 4

Finance is used by businesses to:

Accepted Answer

A)  operate on a daily basis. 
B)  start-up operations. 
C)  expand and grow the business. 
D)  all of the above.

Question 5

Which of the following manages the company's relationships with insurance providers?

Accepted Answer

A)  Internal auditor. 
B)  Risk manager. 
C)  Treasurer. 
D)  Controller.

Question 6

Incentives to foster ethical behaviour in the business community include:

Accepted Answer

A)  solvency. 
B)  legal fines. 
C)  financial gains. 
D)  all of the above.

Question 7

_________________ with standing in the community access financial markets and financial institutions for funds.

Accepted Answer

A)  small partnerships. 
B)  sole traders. 
C)  large entities. 
D)  all of the above.

Question 8

Which of the following is true?

Accepted Answer

A)  Investors like taking on risk. 
B)  Investors expect to be compensated for bearing risk. 
C)  The less risky an investment's cash flows, the less it is worth. 
D)  The more risky an investment's cash flows, the more it is worth.

Question 9

Insider trading occurs when trading shares based on:

Accepted Answer

A)  private information. 
B)  public information. 
C)  information readily available. 
D)  none of the above.

Question 10

A _______________ can sell its securities to the market.

Accepted Answer

A)  public company. 
B)  sole trader. 
C)  private company. 
D)  partnership.

Question 11

During the global financial crisis, risk managers had to:

Accepted Answer

A)  manage insurance portfolio. 
B)  design strategies for limiting risk. 
C)  monitor the company's risk exposure. 
D)  all of the above.

Question 12

Which of the following does not require independent audits to be performed for large public companies?

Accepted Answer

A)  Creditors. 
B)  Investors. 
C)  Debtors. 
D)  ASIC.

Question 13

Most start-up businesses operate as a ________________ because of their small operating scale and capital requirements.

Accepted Answer

A)  company. 
B)  partnership. 
C)  sole trader. 
D)  B or C

Question 14

Which of the following has the final decision-making authority among all the company's executives?

Accepted Answer

A)  CEO. 
B)  CFO. 
C)  Audit committee. 
D)  Board of directors.

Question 15

The time value of money:

Accepted Answer

A)  is one of the most important concepts in finance. 
B)  does not affect the value of cash flows. 
C)  means a dollar today is worth less than a dollar in the future. 
D)  none of the above.

Question 16

Finances are of great economic and social importance. At the __________ level, they drive the operation and performance of the economy.

Accepted Answer

A)  macro. 
B)  government. 
C)  micro. 
D)  all of the above.

Question 17

An unethical business culture can lead to adverse consequences for:

Accepted Answer

A)  general public. 
B)  investors. 
C)  management. 
D)  all of the above

Question 18

Financial managers invest in capital projects where:

Accepted Answer

A)  net cash flows exceed the initial outlay. 
B)  expected sales are high. 
C)  the expected profit exceeds their target profit. 
D)  cash inflows are less than the cost of the project.

Exam 1: Finance in Business