Chapter 1 Practice Tests

A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships, true or false:

False

Financing decisions deal with the left-hand side of the firm's balance sheet and involve the most appropriate mix of current and fixed assets, true or false:

False

Managerial finance is concerned with design and delivery of advice and financial products to individuals, business, and government, true or false:

False

The agency problem occurs when the firm selects an ineffective marketing advertising and PR firm to represent them, true or false:

False

The president or chief executive officer is elected by the firm's stockholders and has ultimate authority to guide corporate affairs and make general policy, true or false:

False

The ___________ is responsible for evaluating and recommending proposed asset investments:

Capital Expenditures Manager

Cash flow and risk are the key determinants in share price. increased risk, other things remaining the same, results in:

a lower share price

the implementation of a pro-active ethics program is expected to result in:

a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow resulting in an increase in share price

Marginal analysis states that financial decisions should be made and actions taken only when:

added benefits exceed added costs

If a company's managers are NOT owners of the company, then they are:

agents

The accountant recognizes revenues and expenses on:

an accrual basis

Making financing decisions includes all of the following EXCEPT: -determining the appropriate mix of short-term and long-term financing -analyzing quarterly budget and performance requests -deciding which individual long-term sources are best at a given point in time -deciding which individual short-term sources are best at a given point in time

analyzing quarterly budget and performance reports

The key role of the financial manager is:

decision making

the key role of the financial manager is:

decision making

A major weakness of a partnership is:

difficulty liquidating or transferring ownership

a major weakness of a partnership is:

difficulty liquidating or transferring ownership

An effective ethics program can:

enhance a corporation's value

A more recent issue that is causing major problems in the business community is:

ethical problems

a more recent issue that is causing major problems in the business community is:

ethical problems

institutional investors are professional investors who work on behalf of the federal government to ensure fairness in the financial markets, true or false:

false

The controller is commonly responsible for:

financial accounting.

higher cash flow and greater risk:

have an inverse effect on share price

the primary goal of the financial manager is:

maximizing wealth

The financial manager is interested in the cash inflows and outflows of the firm, rather than the accounting data, in order to ensure:

solvency

Finance can be defined as:

the art and science of managing money

the accountant's primary function is:

the collection and presentation of financial data

in planning and managing the requirements of the firm, the financial manager is concerned with:

the mix and type of assets, the type of financing utilized, and analysis in order to monitor the financial condition

the financial manager's financing decisions determine:

the most appropriate mix of short-term and long-term financing

To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return, true or false:

true

financial managers actively manage the financial affairs of many types of business-financial and non-financial, private and public, for-profit and not-for-profit, true or false:

true

risk and the magnitude and timing of cash flows are the key determinants of share price, which represents the wealth of the owners in the firm, true or false:

true

the goal of ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice, true or false:

true

to achieve the goal of profit maximization for each alternative being considered, the financial manager should select the one that is expected to result in the highest monetary return, true or false:

true

when considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to maximize shareholder value, true or false:

true

By concentrating on cash flows within the firm the financial manager should be able to:

avoid solvency

Managerial Finance involves tasks such as:

budgeting, financial forecasting, cash management, and funds procurement

Career opportunities in financial services include all of the following EXCEPT: -personal financial planning -real estate and insurance -capital expenditures management -investments

capital expenditures management

the __________ is responsible for evaluating and recommending proposed asset investments:

capital expenditures manager

The primary emphasis of the financial manager is the use of:

cash flow

The responsibility for managing day-to-day operations and carrying out corporate policies belongs to the:

chief executive officer

the dominant form of organization with respect to receipts and net profits is the:

corporation

which of the following legal forms of organization is characterized by limited liability?

corporation

which of the following legal forms of organization's income is NOT taxed under individual income tax rate?

corporation

agency costs include all of the following:

1) bonding and structuring expenses 2) opportunity costs 3) monitoring expenditures

An ethics program is expected to have a ______________ impact on the firm's share price.

Positive

A high earnings per share does not necessarily translate into a high stock price, true or false:

True