Business and Finance Study Guide for Exam: 2021

Maya invests $25,000 and hopes to get a rate of return of at least 8 percent. If she achieves this rate of return, how much money will she receive for her investment?

$2,000

Suppose the annual inflation rate is 7 percent. If an item cost $50 twelve months ago, how much would it cost today?

$53.50

Suppose it takes 1.25 Canadian dollars to purchase one U.S. dollar. Francois has 100 Canadian dollars. How many U.S. dollars can he get for them?

$80

Use the exchange rate given in question 7. How many Canadian dollars can Eva get for her $75 U.S. dollars?

$93.75

Noah's bank offers a six-month certificate of deposit at 4 percent annual interest. If Noah invests $1,000 in one of these CDs, how much will he have at the end of six months?

1,020

Joshua and Katie have a partnership agreement specifying that Joshua receives 40 percent of their company's profits and Katie receives the remainder. This year, Joshua's share of the company profit was $72,000. How much was Katie's share?

108,000

As part of her personal financial plan, Jillian decided to deposit $25 every week into a savings account at her bank. Over the past year, Jillian has met this goal every week except one: that week she only deposited $10. How much did Jillian deposit into her savings account over the past year?

1285

MattCo has three employees: Matt, Katrina, and Britney. Matt is paid a weekly salary of $1,000. Katrina and Britney each earn $12.50 per hour. Last week, Katrina worked 30 hours and Britney worked 32 hours. What were MattCo's expenses for wages and salaries last week?

1775

Over the past 20 years or so, U.S. business investments in other countries have grown by 500 percent. Suppose $500 billion was invested in other countries 20 years ago. How much is invested in other countries now?

2.5 trillion

According to today's foreign exchange rate, 1 U.S. dollar is equal to 0.45 samolians. If Justin exchanges $550 for samolians, how many samolians will he receive?

247.5

Twelve months ago, Becky bought a new computer monitor for $240. Today she noticed an advertisement for the same monitor, but the price was $247.20. By what percentage did the price of the monitor increase?

3% increase

Of the 15,000 businesses in Lonesome County, 72 percent are sole proprietorships. How many businesses in the county are NOT organized in this way?

4,200

Suppose an investor receives $500 for a $10,000 investment. What is the rate of return?

5%

Amber is a sole proprietor who is trying to obtain financing for her new business. She needs $25,000 to get her business started. Amber is putting up 50 percent of the amount herself. Her parents are giving her an additional $5,000 to help her. She decides to apply for a bank loan for the remainder. How much more does she need?

7,500

Joshua and Katie have a partnership agreement specifying that Joshua receives 40 percent of their company's profits and Katie receives the remainder. Last year, their company earned $150,000 in profits. How much was Katie's share worth?

90,000

A business needs to purchase a large number of new computers. Which of the following is the MOST likely way the business will finance the payment for the computers? a. through a short-term loan c. by issuing additional stock b. with a mortgage d. by issuing bonds

A

By far, the most common form of business organization in the United States is the a. sole proprietorship. c. corporation. b. partnership. d. limited liability company.

A

If a country exports more than it imports, it is said to have a a. trade surplus. c. consumer price index. b. trade deficit. d. budget deficit.

A

The tax you pay when you purchase a new CD player is an example of a(n) a. sales tax. c. income tax. b. property tax. d. earnings tax.

A

Which of the following is used to raise new capital for an organization? a. primary offering c. purchase of commercial paper b. secondary offering d. all of the above

A

Which of the following provides loans for purchasing a home or other real estate? a. mortgage company c. investment company b. life insurance company d. all of the above

A

Which of the following will most likely increase demand for a product? a. price of the product is low b. businesses have trouble obtaining resources needed to produce the product c. supply of the product is high d. product does not meet many people's needs

A

Municipal bonds a. are issued by the U.S. federal government. b. usually pay lower interest than other investments. c. are considered a high-risk investment. d. all of the above

B

The first step in the personal financial planning process is to a. set financial goals. b. determine your current economic situation. c. create an action plan. d. evaluate all investment alternatives.

B

The organized exchange of the ownership shares of public corporations occurs at a a. money market. c. commodities market. b. stock market. d. futures market.

B

Which of the following would be considered a non-deposit institution? a. commercial bank c. credit union b. check-cashing outlet d. savings and loan association

B

One of the main roles of the federal government is to a. provide police and fire protection to communities. b. oversee activities involving intrastate commerce. c. oversee activities involving interstate commerce. d. all of the above

B and C

Any item that serves as a method of payment is called a. a stock. c. money. b. a bond. d. a promissory note.

C

Investing in a variety of assets is called a. playing the field. c. diversification. b. budgeting. d. gentrification.

C

Money that is borrowed by a company or government is called a. stock. c. a bond. b. a certificate of deposit. d. a mutual fund.

C

One way for businesses to participate in the global economy is to a. invest in businesses from other countries. b. participate in foreign stock exchanges. c. both a and b d. neither a nor b

C

The major financial disadvantage of a corporation is that a. each owner must participate in the day-to-day operations of the business. b. the business must close or be sold when investors die. c. profits can be taxed twice. d. initial financing is usually more difficult to obtain.

C

This term refers to the economic principle stating that people have wants and needs that are greater than can be satisfied with the available products and services. a. opportunity cost c. scarcity b. choice d. time value of money

C

Which of the following is NOT a guiding principle of the free enterprise economy? a. right of private ownership b. limited government role c. tight restrictions on how consumers spend their money d. business competition

C

Which of the following is an example of a non-renewable resource? a. timber c. oil b. water d. labor

C

A limited liability company combines features of which two forms of business ownership? a. sole proprietorship and corporation b. corporation and multinational conglomerate c. partnership and sole proprietorship d. partnership and corporation

D

All of the following are examples of a business's current expenses EXCEPT a. rent. c. advertising. b. wages and salaries. d. a new warehouse.

D

The largest trading market in the world is the a. New York Stock Exchange. c. commodities market. b. NASDAQ. d. foreign exchange market.

D

Which of the following would be considered a short-term security? a. treasury note c. municipal bond b. corporate bond d. treasury bill;

D

True or False: Every person is involved in finance

True

A financial statement that shows what you own and what you owe is called a (n) ____________________ sheet.

balance

A wise spending plan, often called a(n) ____________________, is the foundation for achieving personal financial goals.

budget

____________________ markets buy and sell various debt and equity securities that are issued for more than one year.

capital

In a(n) ____________________ economy, the government has the primary influence on economic decisions.

command

____________________ are a percentage of corporate earnings allocated to each share of stock.

dividends

The science of decision making about the allocation of scarce resources is called ____________________.

economics

T or F: A savings and loan association is a user-owned, not-for-profit, cooperative financial institution.

false

T or F: Anyone with the money to pay for a share of stock can become an owner of a private corporation.

false

T or F: As more people desire a certain investment, its value will likely decrease

false

T or F: Businesses raise money needed for short-term operating expenses by selling treasury bills.

false

T or F: Corporate income tax is the largest source of funds for the federal government.

false

T or F: In economics, capital resources are sometimes referred to as labor.

false

T or F: It is never advisable to create a financial plan on your own; always hire a professional financial planner to help you with this task.

false

T or F: One major advantage of a partnership is that the partners are not personally liable for any of the business' debts.

false

T or F: Only deposit institutions can make loans to consumers for home mortgages.

false

T or F: Over the past 20 years, U.S. business investments in other countries has sharply decreased.

false

T or F: The United States is a good example of a pure market economy.

false

T or F: The most common type of debt security is stock

false

____________________ refers to activities involved with saving, spending, paying taxes, earning interest, and receiving a salary.

finance

A rise in the general level of prices is called ____________________.

inflation

____________________ commerce refers to business transactions involving companies that do business only in one state.

intrastate

The price at which an equal number of products will be produced and purchased is called the ____________________ price.

market

____________________ markets specialize in buying and selling financial instruments for short time periods of a year or less.

money

A(n) ______________________________ bank is organized primarily for savings and home loans and is owned by the depositors.

mutual savings

____________________ cost is what you give up by making a choice.

opportunity

A(n) ____________________ is a non-deposit institution that offers small loans based on the value of some tangible possession, such as jewelry.

pawnshops

____________________ are the means available to develop solutions for unsatisfied wants and needs.

resources

The profit earned from an investment is called a financial ____________________.

return

Government income is called ____________________.

revenue

When an investor offers stocks and bonds for resale, they are known as a(n) ____________________ offering.

secondary

A(n) ______________________________ is a business owned and managed by one person; it can be formed with almost no legal requirements.

sole proprietorship

The ____________________ of an investment is the length of time the invested money is controlled by others.

term

T or F: A bond is a financial instrument that obligates the issuer to pay the bondholder the principal plus interest at the end of a designated period.

true

T or F: Government plays a significant role in every economic system.

true

T or F: Investments with high financial risks also offer the opportunity for greater financial return.

true

T or F: Source of funds refers to the inflow of cash to a company; use of funds refers to the outflow of money by a company.

true

T or F: The availability of resources limits the supply of products and services.

true

T or F: The exchange rate for a country's currency is based on the supply and demand for that currency.

true

T or F: You should review your personal finance plan at least once a year and perhaps more often based on your personal situation

true