Question 1

The financial manager must execute his or her duties independent of the other activities of the firm in order to properly maximize the value of the firm.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following factors is not a mandate toward globalization for many U.S.businesses?

Accepted Answer

A)   Improvements in transportation and shipping have lowered shipping costs worldwide.
B)   Political clout of consumers has tended to erode barriers designed to protect inefficient manufacturing in other countries.
C)   With development costs rising, firms must increase unit sales outside the United States to remain competitive.
D)   Firms must be able to produce where costs are lowest.
E)   All of the above are factors. E

Question 3

Which of the following are NOT factors that have made the trend toward globalization mandatory for many businesses?

Accepted Answer

A)   Lower trade barriers
B)   Demand for high-quality, low-cost products
C)   Increased volatility of exchange rates for foreign currency
D)   Increased development costs
E)   Improvements in transportation and communications. C

Question 4

The major areas included in the study of finance are financial markets, investments, financial services, and managerial finance.

Accepted Answer

A) True 
 B)False

Question 5

Why is it important for persons in marketing, accounting, production, and other areas in the firm to understand finance?

Accepted Answer

A)   Funds availability affects the firm's ability to increase inventory, change plant capacity, and so forth.
B)   Financial decisions are based on data provided by other functional areas of the firm; thus, it is in the best interests of such areas to provide the most optimistic information possible so that their projects seem most favorable.
C)   There is a good chance persons in marketing, accounting, production, and other areas will have to work in the finance area someday if they want to move up the corporate ladder.
D)   Payments of salaries and other expenses always pass through the finance area of the firm.
E)   All of the above are correct answers.

Question 6

Throughout the twentieth century, the banking industry has often been the subject of a great deal of regulation, much of which has placed banks at a competitive disadvantage compared with other financial institutions in the United States and other banks throughout the world.

Accepted Answer

A) True 
 B)False

Question 7

To achieve success in the financial services industry, one needs a knowledge of the factors that cause interest rates to rise and fall, the regulations to which financial institutions are subject, and the various types of financial instruments.

Accepted Answer

A) True 
 B)False

Question 8

A basic knowledge of finance will help you with your personal investments by helping you understand

Accepted Answer

A)   how to accurately predict changes in the short term interest rates.
B)   how to determine the optimal dividend policy for each firm.
C)   how to determine which technology is most likely to be accepted by consumers.
D)   how to review companies and industries to determine their prospects for future growth and the risk inherent in those companies and industries.
E)   how to predict the growth in sales for the firm.

Question 9

The three main functions in the investments area are sales, the decisions that firms make concerning their cash flows, and determining the optimal mix of securities for a given investor.

Accepted Answer

A) True 
 B)False

Question 10

Managerial finance refers to analysis and management of one's investment portfolio.

Accepted Answer

A) True 
 B)False

Question 11

In general, the role of the financial manager is to plan for the acquisition and use of funds in order to maximize the value of the firm.

Accepted Answer

A) True 
 B)False

Question 12

A major reason there has been a great deal of deregulation in the banking industry since the 1970s is due to the emergence of nonbank organizations and the need to increase competitiveness of U.S.banks and other financial institutions.

Accepted Answer

A) True 
 B)False

Question 13

In the early 1900s, the investments arena was dominated by a small group of very wealthy investors and opulent corporations.

Accepted Answer

A) True 
 B)False

Question 14

During the depression era of the 1930s, the emphasis of managerial finance was developing sophisticated analytical models used to determine the liquidity and value of firms.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is NOT a concept that you need to understand to make rational financial decisions?

Accepted Answer

A)   More value is preferred to less value.
B)   Less risky assets are preferred to riskier assets.
C)   Current cash is more valuable than cash in the future.
D)   Discount rate is a decreasing function of risk.
E)   All of the above are needed.

Question 16

The study of finance consists of three areas⎯financial markets, investments, and managerial finance⎯that are basically independent of each other, because you can be an expert in one area without having knowledge of the other two.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a correct statement?

Accepted Answer

A)   One of the tasks associated with managerial finance is the decision of when and how the firm should expand, whether the area of expansion is related to plant and equipment, existing product lines, the production of new product lines, or the purchase of a new information system to replace an obsolete system.
B)   As business becomes more global, U.S.companies will have a competitive advantage over their foreign counterparts because the regulatory environment in the United States is much less restrictive than in most other countries of the world.
C)   The purpose of much of the banking reform that took place in the 1930s was to expand the financial activities banks could undertake so that they could be more competitive internationally.
D)   It wasn't until the past couple of decades that the analytical tools we use today to evaluate investments were developed.Prior to the development of such tools, the concept that earnings and dividends are related to stock prices was unknown.
E)   All of the statements are correct.

Question 18

Which of the following is NOT an example of a firm becoming more of a "lean thinker" in its operations?

Accepted Answer

A)   simplifying financial reporting to avoid providing redundant or useless information
B)   developing products in the most efficient manner
C)   reducing scrap material being generated in the production process
D)   all of the above are examples of "lean thinking"
E)   none of the above are examples of "lean thinking"

Question 19

Most people in the United States have a thorough knowledge of finance as evidenced by their having high annual savings rate and a well-developed retirement plan.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements are true?

Accepted Answer

A)   The value of any investment is based on the cash flows it is expected to generate in the future.
B)   Investors are not generally risk averse.
C)   Uncertain cash flows are preferred to certain cash flows.
D)   All of the above are true.
E)   None of the above are true.

Exam 1: An Overview of Finance

The financial manager must execute his or her duties independent of the other activities of the firm in order to properly maximize the value of the firm.

Which of the following factors is not a mandate toward globalization for many U.S.businesses?

Which of the following are NOT factors that have made the trend toward globalization mandatory for many businesses?

The major areas included in the study of finance are financial markets, investments, financial services, and managerial finance.

Why is it important for persons in marketing, accounting, production, and other areas in the firm to understand finance?

Throughout the twentieth century, the banking industry has often been the subject of a great deal of regulation, much of which has placed banks at a competitive disadvantage compared with other financial institutions in the United States and other banks throughout the world.

To achieve success in the financial services industry, one needs a knowledge of the factors that cause interest rates to rise and fall, the regulations to which financial institutions are subject, and the various types of financial instruments.

A basic knowledge of finance will help you with your personal investments by helping you understand

The three main functions in the investments area are sales, the decisions that firms make concerning their cash flows, and determining the optimal mix of securities for a given investor.

Managerial finance refers to analysis and management of one's investment portfolio.

In general, the role of the financial manager is to plan for the acquisition and use of funds in order to maximize the value of the firm.

A major reason there has been a great deal of deregulation in the banking industry since the 1970s is due to the emergence of nonbank organizations and the need to increase competitiveness of U.S.banks and other financial institutions.

In the early 1900s, the investments arena was dominated by a small group of very wealthy investors and opulent corporations.

During the depression era of the 1930s, the emphasis of managerial finance was developing sophisticated analytical models used to determine the liquidity and value of firms.

Which of the following is NOT a concept that you need to understand to make rational financial decisions?

The study of finance consists of three areas⎯financial markets, investments, and managerial finance⎯that are basically independent of each other, because you can be an expert in one area without having knowledge of the other two.

Which of the following is a correct statement?

Which of the following is NOT an example of a firm becoming more of a "lean thinker" in its operations?

Most people in the United States have a thorough knowledge of finance as evidenced by their having high annual savings rate and a well-developed retirement plan.

Which of the following statements are true?