PRACTICE TEST 1
1.Finance can be defined as
A.the system of debits and credits.
B.the science of the production, distribution, and consumption of wealth. C.the art and science of managing money.
D.the art of merchandising products and services.
A.involves tasks such as budgeting, financial forecasting, cash management, and funds procurement. B.involves the design and delivery of advice and financial products. C.recognizes funds on an accrual basis.
D.devotes the majority of its attention to the collection and presentation of financial data. 3.The accountant recognizes revenues and expenses on
A.a cash basis.
B.a revenue basis.
C.an accrual basis.
D.an expense basis.
4.The financial manager recognizes revenues and expenses utilizing A.the accrual method.
B.the actual inflows and outflows of cash.
C.the standardized, generally accepted, accounting principles. D.the revenue method.
5.The key role of the financial manager is
B.the presentation of financial statements.
C.the preparation of data for future evaluation.
D.the collection of financial data.
6.Making financing decisions includes all of the following EXCEPT A.determining the appropriate mix of shortterm and longterm financing. B.deciding which individual shortterm sources are best at a given point in time. C.analyzing quarterly budget and performance reports.
D.deciding which individual longterm sources are best at a given point in time. 7.The financial manager's investment decisions determine
A.both the mix and the type of assets found on the firm's balance sheet. B.both the mix and the type of liabilities found on the firm's balance sheet. C.both the mix and the type of assets and liabilities found on the firm's balance sheet. D.both the mix and the type of shortterm and longterm financing.
8.The primary goal of the financial manager is
9.The wealth of the owners of a corporation is represented by A.profits.
B.earnings per share.
10.The conflict between the goals of a firm's owners and the goals of its nonowner managers is A.the agency problem.
C.serious only when profits decline.
D.of little importance in most large U.S. firms.
11.The agency problem may result from a manager's concerns about any of the following EXCEPT A.job security.
12.Financial managers evaluating decision alternatives or potential actions must consider A.only risk.
C.both risk and return.
D.risk, return, and the impact on share price.
13.Corporate ethics policies typically apply to _____ in dealing with _____. A.employee actions; customers and creditors.
B.employee actions; customers, vendors, and regulators.
C.management actions; all corporate constituents.
D.employee actions; all corporate constituents.
14.The overthecounter market is
A.the New York Stock Exchange.
B.an organized stock exchange.
C.a place where securities are bought and sold.
D.an intangible market for unlisted securities.
15.Firms that require funds from external sources can obtain them in one of the following ways EXCEPT
16.The two key financial markets are
A. primary market and secondary market.
B. primary market and money market.
C. money market and capital market.
D. capital market and secondary market.
17.Trading is carried out on the floor of the New York Stock Exchange by A.the negotiation process.
B.the auction process.
C.a telecommunications network.
18.Longterm debt instruments used by both government and business are known as A.stocks.