Which answer option is not a job function associated with a corporate finance department?
A) Determining whether to pay a dividend to the corporation's shareholders.
B) Ensuring that the financial statements accurately reflect the firm's performance
C) Pr
B) Ensuring that the financial statements accurately reflect the firm's performance
*Financial statement preparation is a function of accounting department.
What are the three central components of business ethics?
A) Practical, tangible, and intangible
B) Personal, professional, and corporate
C) Moral, mission, and strategy
D) Personal, managerial, and organizational
B) Personal, professional, and corporate
*Personal ethics are moral principles that guide a person's behavior. Professional ethics are values, practices, and policies that shape the choices made by decision-makers on behalf of their organizations. Corpora
Which answer is a reason why a person would study finance?
A) To apply financial concepts to business situations
B) To better understand the economic environment
C) To improve management of personal finances
D) All of these answers
D) All of these answers
*A person would study finance to improve management of personal finances, apply financial concepts to business situations, and to better understand the economic environment.
Which answer is not a responsibility of a financial manager?
A) Ensuring the business has enough cash to pay its financial obligations
B) Managing the budget
C) Maintaining the company's financial system
D) Figuring out financial projections and whether a
C) Maintaining the company's financial system
*This is the responsibility of a financial accounting manager and not the finance manager.
Which answer is not a requirement for a financial manager to carry out his or her responsibilities?
A) An understanding of the business's long-term strategy
B) The ability to calculate the cost of investing in a product or business opportunity
C) A firm g
D) Knowing with certainty what the business cash flows will be in the future
*Financial managers deal with uncertainty as a routine part of their responsibilities.
Which statement regarding shareholder and market value is correct?
A) The idea of maximizing market value is related to the idea of maximizing shareholder value.
B) Market value is not the price at which a shareholder is willing to sell.
C) All of these a
A) The idea of maximizing market value is related to the idea of maximizing shareholder value.
*When business managers try to maximize the wealth of their firm, they are actually trying to increase their stock price. As the stock price increases, the indi
Which answer is an example of a stakeholder in a company?
A) All of these
B) The company's shareholders
C) The company's employees
D) The company's suppliers
A) All of these
*The company's employees, the company's suppliers, and the company's shareholders are all stakeholders in the company.
Which answer describes a characteristic of a sole proprietorship?
A) Liability is shared among stakeholders.
B) It requires election of a board.
C) Taxes are filed as personal income.
D) It requires formal incorporation.
C) Taxes are filed as personal income.
*A sole proprietorship pays income taxes by including the business income on the owner's personal tax return
What is a disadvantage of a partnership?
A) Personal assets of owners are not protected.
B) Making business decisions involves a board.
C) Filing taxes is overly complicated.
D) Owners must publish financial statements.
A) Personal assets of owners are not protected.
*The liability of the partners for the debts of the business is unlimited.
What does the principal agent problem refer to?
A) The struggle for power between managers and union representatives of a company
B) The personal liability risks that some business owners must accept
C) Potential conflicts of interest between shareholders
C) Potential conflicts of interest between shareholders and managers of a company
*The problem of motivating one party (the agent) to act on behalf of another (the principal) is known as the principal-agent problem.
Which description accurately describes a primary market?
A) A primary market refers to the market where securities are created.
B) Securities start trading in primary market venues including the New York Stock Exchange and Nasdaq.
C) A primary market is o
A) A primary market refers to the market where securities are created.
*Securities are created within a primary market.
A financial institution is a company involved in the business of dealing with monetary transactions, such as loans, investments and deposits.
True
False
True
*The statement is true. A financial institution is a company involved in the business of dealing with monetary transactions, such as loans, investments, and deposits.
One of the main functions of financial markets is matching those who need capital with those who have capital.
True
False
True
*The statement is true. One of the main functions of financial markets is matching those who need capital with those who have capital.
Bond markets and stock markets are two types of money markets.
True
False
False
*The statement is false. Bond markets and stock markets are not two types of money markets. Bond markets and stock markets are two types of capital markets.
A person buying Barnes and Noble stock from an investor who owns shares in Barnes and Noble is participating in a primary market.
True
False
False
*The statement is false. If a person buys Barnes and Noble stock from an investor who owns shares in Barnes and Noble then he/she is participating in a secondary market, not a primary market.
Company directors and high-level executives, ("insiders"), are legally permitted to buy and sell shares of the company that they work for.
True
False
True
*The statement is true. Insiders are legally permitted to buy and sell shares of the companies they work for. However, these transactions must be properly registered with the Securities and Exchange Commission (SEC).