Question 1

Which of the following factors is most important in investment decisions?

Accepted Answer

A) The change in earnings before taxes 
B) The change in gross sales revenue 
C) The change in net income 
D) The change in after-tax cash flow 
A) The change in earnings before taxes 
B) The change in gross sales revenue 
C) The change in net income 
D) The change in after-tax cash flow D

Question 2

According to the authors, the personal decision to take a year off from work to obtain a graduate degree in business is primarily a(n)[blank] decision.

Accepted Answer

A) social 
B) financial 
C) ethical 
D) investment 
A) social 
B) financial 
C) ethical 
D) investment D

Question 3

Discuss the risk-return trade-off and how it relates to finance.

Accepted Answer

As people are risk averse, they need a higher return as the risk gets higher.This means that investors will need a higher return on bonds that they do not consider to be as safe as other bonds, and they will need a higher return on stock when the company in question's stock seems to be riskier than the stock of other companies.

Question 4

In a [blank], the life of the partnership is tied to the life of the general partner.

Accepted Answer

A) private company 
B) general partnership 
C) public company 
D) limited partnership 
A) private company 
B) general partnership 
C) public company 
D) limited partnership

Question 5

The area of finance that deals with long-term investment decisions is known as [blank].

Accepted Answer

A) capital structure 
B) working capital management 
C) financial strategy 
D) capital budgeting 
A) capital structure 
B) working capital management 
C) financial strategy 
D) capital budgeting

Question 6

Which of the following goals is in the best long-term interest of shareholders?

Accepted Answer

A) Profit maximisation 
B) Risk minimisation 
C) Maximising of the market value of the existing shareholders' common stock 
D) Maximising sales revenues 
A) Profit maximisation 
B) Risk minimisation 
C) Maximising of the market value of the existing shareholders' common stock 
D) Maximising sales revenues

Question 7

Only a few financial decisions involve some sort of risk-return trade-off.

Accepted Answer

A) True 
 B)False

Question 8

Managing funding for the company's day-to-day operations is known as [blank].

Accepted Answer

A) capital budgeting decisions 
B) working capital management 
C) capital structure decisions 
D) generating sustainable portfolios 
A) capital budgeting decisions 
B) working capital management 
C) capital structure decisions 
D) generating sustainable portfolios

Question 9

The two worst performers on the ASX in 2016 were healthcare companies.

Accepted Answer

A) True 
 B)False

Question 10

The goal of maximising shareholder wealth inevitably conflicts with socially responsible behaviour on the part of corporations.

Accepted Answer

A) True 
 B)False

Question 11

The goal of profit maximisation ignores the timing of profit.

Accepted Answer

A) True 
 B)False

Question 12

Limited partners may actively manage the business.

Accepted Answer

A) True 
 B)False

Question 13

Profit maximisation is not an adequate goal of the firm when making financial decisions because [blank].

Accepted Answer

A) it reflects shareholder wealth maximisation 
B) it reflects the risk inherent in different projects that will generate the profits 
C) it ignores the timing of a project's returns 
D) it minimises the share price 
A) it reflects shareholder wealth maximisation 
B) it reflects the risk inherent in different projects that will generate the profits 
C) it ignores the timing of a project's returns 
D) it minimises the share price

Question 14

The case of Tony Faddell and the MP3 player is an illustration of how [blank].

Accepted Answer

A) a management team's investment decision can positively affect a firm's total value 
B) becoming a lean retailer through end-to-end process and systems excellence 
C) maximising wealth of shareholders is more important than doing the right thing for stakeholders 
D) lack of financial ethics can cost investors billions of dollars 
A) a management team's investment decision can positively affect a firm's total value 
B) becoming a lean retailer through end-to-end process and systems excellence 
C) maximising wealth of shareholders is more important than doing the right thing for stakeholders 
D) lack of financial ethics can cost investors billions of dollars

Question 15

Investors choose to invest in higher risk investments because these investments offer higher [blank].

Accepted Answer

A) expected returns 
B) inflation 
C) actual returns 
D) future consumption 
A) expected returns 
B) inflation 
C) actual returns 
D) future consumption

Question 16

The goal of the firm should be the maximisation of profit.

Accepted Answer

A) True 
 B)False

Question 17

Consider cash flows for projects X and Y such as:   A rational person would prefer receiving cash flows sooner because [blank].

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 18

Which form of organisation is free of initial legal requirements?

Accepted Answer

A) Sole proprietorship 
B) Private company 
C) Corporation 
D) Public company 
A) Sole proprietorship 
B) Private company 
C) Corporation 
D) Public company

Question 19

Rewarding executives for increasing quarterly earnings will motivate them to act in the long-term best interests of shareholders.

Accepted Answer

A) True 
 B)False

Question 20

Which act mandates that Australian CEOs and CFOs must affirm in writing that company financial statements are 'true and fair?'

Accepted Answer

A) The Corporate Law Economic Reform Program Act 2004 
B) The Insider Trading Act of 1988 
C) The Sarbanes-Oxley Act 
D) The Bank Integration Act of 1901 
A) The Corporate Law Economic Reform Program Act 2004 
B) The Insider Trading Act of 1988 
C) The Sarbanes-Oxley Act 
D) The Bank Integration Act of 1901

Exam 1: Getting Startedprinciples of Finance

Which of the following factors is most important in investment decisions?

According to the authors, the personal decision to take a year off from work to obtain a graduate degree in business is primarily a(n)[blank] decision.

Discuss the risk-return trade-off and how it relates to finance.

In a [blank], the life of the partnership is tied to the life of the general partner.

The area of finance that deals with long-term investment decisions is known as [blank].

Which of the following goals is in the best long-term interest of shareholders?

Only a few financial decisions involve some sort of risk-return trade-off.

Managing funding for the company's day-to-day operations is known as [blank].

The two worst performers on the ASX in 2016 were healthcare companies.

The goal of maximising shareholder wealth inevitably conflicts with socially responsible behaviour on the part of corporations.

The goal of profit maximisation ignores the timing of profit.

Limited partners may actively manage the business.

Profit maximisation is not an adequate goal of the firm when making financial decisions because [blank].

The case of Tony Faddell and the MP3 player is an illustration of how [blank].

Investors choose to invest in higher risk investments because these investments offer higher [blank].

The goal of the firm should be the maximisation of profit.

Consider cash flows for projects X and Y such as: A rational person would prefer receiving cash flows sooner because [blank].

Which form of organisation is free of initial legal requirements?

Rewarding executives for increasing quarterly earnings will motivate them to act in the long-term best interests of shareholders.

Which act mandates that Australian CEOs and CFOs must affirm in writing that company financial statements are 'true and fair?'

Firms and the Financial Market

Understanding Financial Statements, Taxes and Cash Flows

Financial Analysissizing up Firm Performance

Time Value of Moneythe Basics

The Time Value of Moneyannuities and Other Topics

Risk and Returnan Introduction: History of Financial Market Returns

Risk and Returncapital Market Theory

Debt Valuation and Interest Rates

Shares Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluations

The Cost of Capital

Analysis and Impact of Leverage

Capital Structure Policy

Dividend and Share-Buyback Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

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