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Principles of Finance

Multiple Choice

Principles of FinanceMultiple Choice

1 .
Which of the following was NOT identified by your authors as one of the three main areas of financial study?
  1. business finance
  2. capital budgeting
  3. investments
  4. financial markets and institutions
2 .
What is the process of determining which long-term or fixed assets to acquire in an effort to maximize shareholder value?
  1. Business finance
  2. Capital budgeting
  3. Investments
  4. Financial markets and institutions
3 .
In an organization with each of these financial positions, which title is most likely to be associated with a job description that is less of a “hands-on” manager and that engages more in visionary and strategic planning?
  1. comptroller (or controller)
  2. treasurer
  3. vice president of finance
  4. chief financial officer (CFO)
4 .
Which of the following statements is false?
  1. Financial planning is an important tool of for-profit organizations such as corporations and partnerships but is not important for not-for-profit enterprises such charitable organizations or governments.
  2. Good financial planning considers past, present, and pro forma income statements.
  3. Balance sheets are critical elements of the financial planning process and help demonstrate expected sources and uses of funds.
  4. Forecasting in the form of expected sales, cost of funds, and micro- and macroeconomic conditions are essential elements of financial planning.
5 .
Which of the following statements regarding data is generally NOT true?
  1. Financial data is important for internal and external analysis of business firms.
  2. Outsiders use publicly available data about firms to make investment and regulatory decisions.
  3. “Gut feelings” decision-making tends to be more consistent with value maximization.
  4. Suppliers need financial information to determine if they should supply trade credit, and customers need to know if a firm’s products are reliable and appropriately priced.
6 .
Which of the following is generally NOT true about cloud data storage versus on-site data storage?
  1. Cloud data storage provides storage cost advantages.
  2. Cloud data storage causes increased energy consumption.
  3. Cloud data storage comes with specialized data protection services.
  4. Cloud data storage comes with specialized maintenance services.
7 .
Which of the following describes United States Bureau of Labor Statistics (BLS) expectations of jobs using financial skills in the next decade?
  1. plentiful but low paying
  2. few and low paying
  3. plentiful and high paying
  4. few and high paying
8 .
Which of the following organizations would be unlikely to hire a financial analyst?
  1. Government agencies may hire financial analysts to aid in regulatory oversight and enforcement.
  2. Investment companies may hire financial analysts to produce financial reports.
  3. Corporations may hire financial analysts to develop financial forecasts.
  4. All of the above organizations are likely to hire and develop financial analysts.
9 .
The _______________ market is the market for _______________ securities, and the _______________ is the market for _______________ securities.
  1. primary; used; secondary; new
  2. primary; new; secondary; used
  3. secondary; new; primary; new
  4. secondary; used; primary; used
10 .
_______________ own the securities that they buy or sell; when they engage in a financial transaction, they are trading from their own portfolio.
  1. Dealers
  2. Brokers
  3. Advisers
  4. Comptrollers
11 .
_______________ act as facilitators in a market, and they bring together buyers and sellers for a transaction.
  1. Dealers
  2. Brokers
  3. Advisers
  4. Comptrollers
12 .
_______________ is the study of the allocation of scarce resources, _______________ is devoted to the study of these decisions of allocation by small or individual entities, and _______________ examines decisions taken together or in the aggregate.
  1. Macroeconomics; microeconomics; economics
  2. Microeconomics; economics; macroeconomics
  3. Economics; microeconomics; macroeconomics
  4. Economics; macroeconomics; microeconomics
13 .
Which of the following is NOT an economy-wide macroeconomic variable used in macro-forecasting models?
  1. inflation
  2. unemployment
  3. economic growth
  4. CEO turnover
14 .
_______________ is the market for short-term, low-risk, highly liquid, homogeneous securities.
  1. The capital market
  2. The financial market
  3. The stock market
  4. The money market
15 .
_______________ are short-term debt instruments issued by the federal government.
  1. Treasury bills
  2. Treasury notes
  3. Treasury bonds
  4. Federal Reserve notes
16 .
_______________ is a short-term, unsecured security issued by corporations and financial institutions to meet short-term financing needs such as inventory and receivables.
  1. A Treasury bill
  2. Commercial paper
  3. A negotiable certificate of deposit
  4. A Treasury note
17 .
_______________ are US government debt instruments with maturities of 2, 3, 5, 7, or 10 years.
  1. Federal funds
  2. Federal Reserve notes
  3. Treasury notes
  4. Treasury bonds
18 .
_______________ investments tend to have _______________ risk and _______________ expected returns.
  1. Long-term; less; smaller
  2. Long-term; greater; greater
  3. Short-term; greater; smaller
  4. Short-term; less; greater
19 .
_______________ value is what a consumer pays for a product. _______________ value is what a consumer is willing to pay for a product.
  1. Market; Economic
  2. Economic; Market
  3. Book; Market
  4. Economic; Book
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