Question 1

Which of the following is a characteristic of an efficient market?

Accepted Answer

A) Small number of individuals 
B) Opportunities exist for investors to profit from publicly available information. 
C) Security prices reflect fair value of the firm. 
D) Immediate response occurs for new public information. 
A) Small number of individuals 
B) Opportunities exist for investors to profit from publicly available information. 
C) Security prices reflect fair value of the firm. 
D) Immediate response occurs for new public information.

Question 2

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. 
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 3

Investors prefer $1 today versus $1 in the future due to

Accepted Answer

A) time value of money. 
B) response to incentives. 
C) the need for immediate gratification. 
D) A and B. 
A) time value of money. 
B) response to incentives. 
C) the need for immediate gratification. 
D) A and B.

Question 4

Capital structure refers to the financing of long-term investments.

Accepted Answer

A) True 
 B)False

Question 5

Consider cash flows for Projects X and Y such as:
Project X Project Y
Year 1 $3000 $ 0
Year 2 $ 0 $3000
A rational person would prefer receiving cash flows sooner because

Accepted Answer

A) the money can be reinvested. 
B) the money is nice to have around. 
C) the investor may be tired of a particular investment. 
D) the investor is indifferent to either proposal. 
A) the money can be reinvested. 
B) the money is nice to have around. 
C) the investor may be tired of a particular investment. 
D) the investor is indifferent to either proposal.

Question 6

Foregoing the earning potential of a dollar today is referred to as the

Accepted Answer

A) time value of money. 
B) opportunity cost concept. 
C) risk/return tradeoff. 
D) creation of wealth. 
A) time value of money. 
B) opportunity cost concept. 
C) risk/return tradeoff. 
D) creation of wealth.

Question 7

A reputation for unethical behavior can negatively affect the value of a company's stock.

Accepted Answer

A) True 
 B)False

Question 8

The major sources of financing for corporations are

Accepted Answer

A) partners contributions. 
B) exchanges between shareholders. 
C) interest and dividends. 
D) debt and equity. 
A) partners contributions. 
B) exchanges between shareholders. 
C) interest and dividends. 
D) debt and equity.

Question 9

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

Accepted Answer

A) True 
 B)False

Question 10

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

Accepted Answer

A) True 
 B)False

Question 11

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 ignores the timing of a project's returns. 
D) all of the above are correct. 
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 ignores the timing of a project's returns. 
D) all of the above are correct.

Question 12

Which forms of organization are free of initial legal requirements?

Accepted Answer

A) Sole proprietorship 
B) General partnership 
C) Corporation 
D) Both A and B 
A) Sole proprietorship 
B) General partnership 
C) Corporation 
D) Both A and B

Question 13

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

Accepted Answer

Incremental cash flows describe the tota

Question 14

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

Accepted Answer

A) $1,000 in five years because they are not good at saving money. 
B) $1,000 today because it will be worth more than $1,000 received in five years. 
C) $1,000 in five years because it will be worth more than $1,000 received today. 
D) Investors would be indifferent to when they would receive the $1,000. 
E) None of the above. 
A) $1,000 in five years because they are not good at saving money. 
B) $1,000 today because it will be worth more than $1,000 received in five years. 
C) $1,000 in five years because it will be worth more than $1,000 received today. 
D) Investors would be indifferent to when they would receive the $1,000. 
E) None of the above.

Question 15

General partners have unrestricted transferability of ownership,while limited partners must have the consent of all partners to transfer their ownership.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following should be considered when assessing the financial impact of business decisions?

Accepted Answer

A) The amount of projected earnings 
B) The risk-return tradeoff 
C) The timing of projected earnings;i.e. ,when they are expected to occur 
D) All of the above 
A) The amount of projected earnings 
B) The risk-return tradeoff 
C) The timing of projected earnings;i.e. ,when they are expected to occur 
D) All of the above

Question 17

Maximization of shareholder wealth as a goal is superior to accounting profit maximization because

Accepted Answer

A) it considers the time value of the money. 
B) following the shareholder wealth maximization goal will ensure high stock prices. 
C) accounting profits are not the same as cash flows. 
D) A and C. 
A) it considers the time value of the money. 
B) following the shareholder wealth maximization goal will ensure high stock prices. 
C) accounting profits are not the same as cash flows. 
D) A and C.

Question 18

Which of the following forms of business organization is the dominant economic force in the United States?

Accepted Answer

A) The sole proprietorship 
B) The general partnership 
C) The limited partnership 
D) The joint venture 
E) The corporation 
A) The sole proprietorship 
B) The general partnership 
C) The limited partnership 
D) The joint venture 
E) The corporation

Question 19

What are the three basic questions addressed by the study of investments?

Accepted Answer

1.What investments should the

Question 20

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

Accepted Answer

A) Corporation 
B) General Partnership 
C) Sole proprietorship 
D) Limited partnership 
A) Corporation 
B) General Partnership 
C) Sole proprietorship 
D) Limited partnership

Which of the following is a characteristic of an efficient market?

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

Investors prefer $1 today versus $1 in the future due to

Capital structure refers to the financing of long-term investments.

Consider cash flows for Projects X and Y such as: Project X Project Y Year 1 $3000 $ 0 Year 2 $ 0 $3000 A rational person would prefer receiving cash flows sooner because

Foregoing the earning potential of a dollar today is referred to as the

A reputation for unethical behavior can negatively affect the value of a company's stock.

The major sources of financing for corporations are

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

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

Which forms of organization are free of initial legal requirements?

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

General partners have unrestricted transferability of ownership,while limited partners must have the consent of all partners to transfer their ownership.

Which of the following should be considered when assessing the financial impact of business decisions?

Maximization of shareholder wealth as a goal is superior to accounting profit maximization because

Which of the following forms of business organization is the dominant economic force in the United States?

What are the three basic questions addressed by the study of investments?

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 1: Getting Started-Principles of Finance

Which of the following is a characteristic of an efficient market?

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

Investors prefer $1 today versus $1 in the future due to

Capital structure refers to the financing of long-term investments.

Consider cash flows for Projects X and Y such as: Project X Project Y Year 1 $3000 $ 0 Year 2 $ 0 $3000 A rational person would prefer receiving cash flows sooner because

Foregoing the earning potential of a dollar today is referred to as the

A reputation for unethical behavior can negatively affect the value of a company's stock.

The major sources of financing for corporations are

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

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

Which forms of organization are free of initial legal requirements?

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

General partners have unrestricted transferability of ownership,while limited partners must have the consent of all partners to transfer their ownership.

Which of the following should be considered when assessing the financial impact of business decisions?

Maximization of shareholder wealth as a goal is superior to accounting profit maximization because

Which of the following forms of business organization is the dominant economic force in the United States?

What are the three basic questions addressed by the study of investments?

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters