Question 1

Which circumstance would be most likely to lead to higher interest rates on all debt securities in the economy?

Accepted Answer

A)  Households start saving a larger percentage of their income. 
B)  The economy moves from a boom to a recession. 
C)  The level of inflation begins to decline. 
D)  With expansion plans, corporate increase their demand for capital. 
A)  Households start saving a larger percentage of their income. 
B)  The economy moves from a boom to a recession. 
C)  The level of inflation begins to decline. 
D)  With expansion plans, corporate increase their demand for capital.

Question 2

Which of the following statements best describes interest rates?

Accepted Answer

A)  The cost of money to fund users is basically determined by the rate of return required by fund providers. 
B)  If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  If companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  If expected inflation increases, interest rates are likely to decrease. 
A)  The cost of money to fund users is basically determined by the rate of return required by fund providers. 
B)  If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  If companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  If expected inflation increases, interest rates are likely to decrease.

Question 3

What should be the primary operating goal of a publicly owned firm interested in serving its shareholders?

Accepted Answer

A)  maximize the stock price per share over the long run, which is the stock's intrinsic value 
B)  maximize the firm's expected EPS 
C)  maximize the firm's expected total income 
D)  maximize the stock price on a specific target date 
A)  maximize the stock price per share over the long run, which is the stock's intrinsic value 
B)  maximize the firm's expected EPS 
C)  maximize the firm's expected total income 
D)  maximize the stock price on a specific target date

Question 4

Today, trustee services can be arranged only with trust companies.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Accepted Answer

A)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
B)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
C)  Corporate investors are exposed to limited growth potential. 
D)  Corporations generally face relatively few regulations. 
A)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
B)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
C)  Corporate investors are exposed to limited growth potential. 
D)  Corporations generally face relatively few regulations.

Question 6

What is one of the drawbacks of switching from a partnership to the corporate form of organization?

Accepted Answer

A)  It subjects the firm to additional regulations. 
B)  It makes it more difficult for the firm to raise additional capital. 
C)  It makes the firm's investors subject to greater potential personal liabilities. 
D)  It makes it more difficult for the firm's investors to transfer their ownership interests. 
A)  It subjects the firm to additional regulations. 
B)  It makes it more difficult for the firm to raise additional capital. 
C)  It makes the firm's investors subject to greater potential personal liabilities. 
D)  It makes it more difficult for the firm's investors to transfer their ownership interests.

Question 7

Which of the following is an example of a primary market transaction?

Accepted Answer

A)  You sell 200 shares of IBM stock on the TSX through your broker. 
B)  IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C)  One financial institution buys 200,000 shares of IBM share from another institution with help of an investment banker. 
D)  You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the TSX. 
A)  You sell 200 shares of IBM stock on the TSX through your broker. 
B)  IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C)  One financial institution buys 200,000 shares of IBM share from another institution with help of an investment banker. 
D)  You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the TSX.

Question 8

Which of the following statements best describes corporate goals?

Accepted Answer

A)  The proper goal of the financial manager should be to attempt to maximize the firm's expected cash flows, because this will add the most to the wealth of the individual shareholders. 
B)  The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon, generally the coming year. 
C)  The riskiness inherent in a firm's earnings per share (EPS) depends on the characteristics of the projects the firm selects, and thus on the firm's assets. However, EPS is not affected by the manner in which those assets are financed. 
D)  Potential agency problems can arise between shareholders and managers, because managers hired as agents to act on behalf of the owners may instead make decisions favourable to themselves rather than the shareholders. 
A)  The proper goal of the financial manager should be to attempt to maximize the firm's expected cash flows, because this will add the most to the wealth of the individual shareholders. 
B)  The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon, generally the coming year. 
C)  The riskiness inherent in a firm's earnings per share (EPS) depends on the characteristics of the projects the firm selects, and thus on the firm's assets. However, EPS is not affected by the manner in which those assets are financed. 
D)  Potential agency problems can arise between shareholders and managers, because managers hired as agents to act on behalf of the owners may instead make decisions favourable to themselves rather than the shareholders.

Question 9

Which of the following services will NOT be offered by insurance companies?

Accepted Answer

A)  taking deposits 
B)  selling policies with saving features 
C)  administrating pension funds 
D)  making payments to beneficiaries 
A)  taking deposits 
B)  selling policies with saving features 
C)  administrating pension funds 
D)  making payments to beneficiaries

Question 10

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Accepted Answer

A) True 
 B)False

Which circumstance would be most likely to lead to higher interest rates on all debt securities in the economy?

Which of the following statements best describes interest rates?

What should be the primary operating goal of a publicly owned firm interested in serving its shareholders?

Today, trustee services can be arranged only with trust companies.

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

What is one of the drawbacks of switching from a partnership to the corporate form of organization?

Which of the following is an example of a primary market transaction?

Which of the following statements best describes corporate goals?

Which of the following services will NOT be offered by insurance companies?

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Financial Planning and Forecasting Financial Statements

Bonds, Bond Valuation, and Interest Rates

Risk, Return, and the Capital Asset Pricing Model

Stocks, Stock Valuation, and Stock Market Equilibrium

The Cost of Capital

The Basics of Capital Budgeting: Evaluating Cash Flows

Cash Flow Estimation and Risk Analysis

Capital Structure Decisions

Distributions to Shareholders: Dividends and Repurchases

Initial Public Offerings, Investment Banking, and Financial Restructuring

Lease Financing

Capital Market Financing: Hybrid and Other Securities

Working Capital Management and Short-Term Financing

Current Asset Management

Financial Options and Applications in Corporate Finance

Decision Trees, Real Options, and Other Capital Budgeting Topics

Derivatives and Risk Management

International Financial Management

Corporate Valuation, Value-Based Management, and Corporate Governance

Mergers, Acquisitions, and Restructuring

Filters

Exam 1: An Overview of Financial Management and the Financial Environment

Which circumstance would be most likely to lead to higher interest rates on all debt securities in the economy?

Which of the following statements best describes interest rates?

What should be the primary operating goal of a publicly owned firm interested in serving its shareholders?

Today, trustee services can be arranged only with trust companies.

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

What is one of the drawbacks of switching from a partnership to the corporate form of organization?

Which of the following is an example of a primary market transaction?

Which of the following statements best describes corporate goals?

Which of the following services will NOT be offered by insurance companies?

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Financial Planning and Forecasting Financial Statements

Bonds, Bond Valuation, and Interest Rates

Risk, Return, and the Capital Asset Pricing Model

Stocks, Stock Valuation, and Stock Market Equilibrium

The Cost of Capital

The Basics of Capital Budgeting: Evaluating Cash Flows

Cash Flow Estimation and Risk Analysis

Capital Structure Decisions

Distributions to Shareholders: Dividends and Repurchases

Initial Public Offerings, Investment Banking, and Financial Restructuring

Lease Financing

Capital Market Financing: Hybrid and Other Securities

Working Capital Management and Short-Term Financing

Current Asset Management

Financial Options and Applications in Corporate Finance

Decision Trees, Real Options, and Other Capital Budgeting Topics

Derivatives and Risk Management

International Financial Management

Corporate Valuation, Value-Based Management, and Corporate Governance

Mergers, Acquisitions, and Restructuring

Filters