Question 1

In measuring value,the firm's focus should be on:

Accepted Answer

A)  cash flow.
B)  accounting profits.
C)  time value of money.
D)  earnings per share.

Question 2

Mary has developed a diet pill for obesity.She wants to create a new company with a major drug company.She is concerned about liability if someone becomes sick or dies after using the diet pill.What is the best form of business organization for the new company?

Accepted Answer

A)  A sole proprietorship
B)  General partnership with Mary and the drug company as equal partners
C)  S-type corporation with Mary and the drug company owning equal shares
D)  Limited liability company with Mary and the drug company owning equal s hares

Question 3

Which of the following statements best represents what finance is about?

Accepted Answer

A)  How political,social,and economic factors affect corporations
B)  How corporations can maximize profits
C)  How to create and maintain economic wealth
D)  How to reduce shareholder risk

Question 4

In what important ways do financial managers and the accounting discipline interact?

Accepted Answer

Financial managers deal with the managem...

Question 5

Profit maximization is NOT an adequate goal of the firm when making financial decisions because:

Accepted Answer

A)  it does not necessarily reflect shareholder wealth maximization.
B)  it ignores the risk inherent in different projects that will generate the profits.
C)  it can over-emphasize a project's short-term returns.
D)  All of the above.

Question 6

Which type of business organization is the best for attracting new equity capital?

Accepted Answer

A)  Sole proprietorship
B)  Limited liability corporation
C)  General partnership
D)  A public corporation

Question 7

In terms of costs to organize each,which of the following sequences is correct,moving from highest to lowest cost?

Accepted Answer

A)  General partnership,sole proprietorship,limited partnership,corporation.
B)  Sole proprietorship,general partnership,limited partnership,corporation.
C)  Corporation,limited partnership,general partnership,sole proprietorship.
D)  Sole proprietorship,general partnership,corporation,limited partnership.

Question 8

Which of the following is NOT considered to be a factor that affects the external environment?

Accepted Answer

A)  Interest rates
B)  Expansion and recession of the economy
C)  Dividend policy
D)  Credit conditions

Question 9

Which of the following forms of organizations have earnings that are taxed twice,once as business income and once as personal income,when earnings are distributed to the owners in the form of dividends?

Accepted Answer

A)  Corporations
B)  General partnerships
C)  Limited partnerships
D)  Both A and C

Question 10

Some fundamental concepts that nonfinancial managers need to understand include:

Accepted Answer

A)  the ability to assess day-to-day cash management.
B)  the ability to assess future financing requirements.
C)  the ability to understand the role of capital markets in raising long-term funds.
D)  All of the above.

Question 11

Operating activities are concerned with:

Accepted Answer

A)  determining whether a company's assets should be financed with debt or equity.
B)  managing a firm's cash budgeting procedures.
C)  managing a firm's working capital.
D)  planning sales of a corporation's equity capital.

Question 12

Financial management deals with the creation and maintenance of economic value or wealth.

Accepted Answer

A) True 
 B)False

Question 13

If managers are making decisions to maximize shareholder wealth,then they are primarily concerned with making decisions that should:

Accepted Answer

A)  positively affect profits.
B)  increase the market value of the firm's common stock.
C)  either increase or have no effect on the value of the firm's common stock.
D)  Accomplish all of the above.

Question 14

Borrowing monies from financial institutions to fund the firm's revenue growth is an example of which cash-related activity in the cash flow cycle?

Accepted Answer

A)  Operating activity
B)  Profitability activity
C)  Investing activity
D)  Financing activity

Question 15

Offering discounts to accelerate the collection of accounts receivables in an example of which cash-related activity in the cash flow cycle?

Accepted Answer

A)  Operating activity
B)  Profitability activity
C)  Investing activity
D)  Financing activity

Question 16

Which of the following is NOT considered to be a disadvantage of the sole proprietorship form of a business organization?

Accepted Answer

A)  Limited ability to raise capital
B)  Its life is limited to that of the owner
C)  Unlimited liability of business owners
D)  Fewer regulations and reporting requirements

Question 17

The best form of business entity to attract new capital is the sole proprietorship because investors only need to deal with one owner.

Accepted Answer

A) True 
 B)False

Question 18

The financial management framework:

Accepted Answer

A)  examines the factors in the external environment in which the firm operates.
B)  elaborates on the three main cash-related activities of the firm.
C)  examines how value is created and measured.
D)  All of the above.

Question 19

All of the following is a financing factor that impacts the firm's leverage EXCEPT:

Accepted Answer

A)  debt financing.
B)  new equity.
C)  suppliers.
D)  marketing.

Question 20

Although the firm has many important stakeholders,the ________ are most important because they are essentially the owners of the firm.

Accepted Answer

A)  Shareholders
B)  Investment bankers
C)  Lenders
D)  Managers

Exam 1: Overview of Financial Management

Financial management deals with the creation and maintenance of economic value or wealth.

Correct AnswerverifiedShow Answer

Although the firm has many important stakeholders,the ________ are most important because they are essentially the owners of the firm.

Correct AnswerverifiedShow Answer

In what important ways do financial managers and the accounting discipline interact?

Correct AnswerverifiedFinancial managers deal with the managem...View AnswerShow Answer

Which of the following is NOT considered to be a disadvantage of the sole proprietorship form of a business organization?

Correct AnswerverifiedShow Answer

Which type of business organization is the best for attracting new equity capital?

Correct AnswerverifiedShow Answer

Some fundamental concepts that nonfinancial managers need to understand include:

Correct AnswerverifiedShow Answer

Which of the following statements best represents what finance is about?

Correct AnswerverifiedShow Answer

In measuring value,the firm's focus should be on:

Correct AnswerverifiedShow Answer

Which of the following is NOT considered to be a factor that affects the external environment?

Correct AnswerverifiedShow Answer

Borrowing monies from financial institutions to fund the firm's revenue growth is an example of which cash-related activity in the cash flow cycle?

Correct AnswerverifiedShow Answer

Mary has developed a diet pill for obesity.She wants to create a new company with a major drug company.She is concerned about liability if someone becomes sick or dies after using the diet pill.What is the best form of business organization for the new company?

Correct AnswerverifiedShow Answer

The best form of business entity to attract new capital is the sole proprietorship because investors only need to deal with one owner.

Correct AnswerverifiedShow Answer

Which of the following forms of organizations have earnings that are taxed twice,once as business income and once as personal income,when earnings are distributed to the owners in the form of dividends?

Correct AnswerverifiedShow Answer

In terms of costs to organize each,which of the following sequences is correct,moving from highest to lowest cost?

Correct AnswerverifiedShow Answer

All of the following is a financing factor that impacts the firm's leverage EXCEPT:

Correct AnswerverifiedShow Answer

Offering discounts to accelerate the collection of accounts receivables in an example of which cash-related activity in the cash flow cycle?

Correct AnswerverifiedShow Answer

The financial management framework:

Correct AnswerverifiedShow Answer

If managers are making decisions to maximize shareholder wealth,then they are primarily concerned with making decisions that should:

Correct AnswerverifiedShow Answer

Profit maximization is NOT an adequate goal of the firm when making financial decisions because:

Correct AnswerverifiedShow Answer

Operating activities are concerned with:

Correct AnswerverifiedShow Answer

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Financial managers deal with the managem...
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