,Corporate Finance Core Principles and Applications Edition
7 by Ross
CORRECT ANSWERS ARE LOCATED IN THE 2ND HALF OF THIS DOC.
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) Which one of the following items is an intangible asset?
A) A building
B) Accounts receivable
C) Inventory
D) A loan from a creditor
E) A patent
2) Current assets include
A) inventory and cash.
B) cash and buildings.
C) inventory and machinery.
D) equipment and cash.
E) buildings and inventory.
3) Short-term finance
A) ensures sufficient equipment is available to produce the desired amount of product.
B) ensures that long-term debt is acquired at the lowest possible cost.
C) ensures that dividends are paid to all stockholders on an annual basis.
D) balances the amount of company debt with the amount of available equity.
E) is concerned with managing net working capital.
4) Which one of the following is a capital budgeting decision?
A) Deciding whether to build a new distribution center
B) Determining how quickly to pay their accounts payable
C) Determining whether to use short- or long-term liabilities
D) Deciding how many shares of stock to repurchase
E) Determining how much cash to keep on hand
5) The managers in a firm have decided to move the company's headquarters from a rented
space to a new building that the company will purchase. This is an example of
A) a net working capital decision.
B) a capital budgeting decision.
C) a short-term financing decision.
D) a capital structure decision.
E) a cash flow decision.
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,Corporate Finance Core Principles and Applications Edition
7 by Ross
6) Which one of the following actions involves a net working capital decision?
A) Deciding whether to build an apartment building
B) Negotiating whether to lease or buy a new store location
C) Determining whether to issue debt or equity to pay for the firm's expansion
D) Deciding how much inventory to keep on hand
E) Determining whether to replace a fleet of vehicles
7) The process of planning and managing a firm's long-term investments is referred to as
A) capital budgeting.
B) agency cost analysis.
C) financial depreciation.
D) working capital management.
E) capital structure.
8) Capital structure decisions involve
A) determining the ideal mix of current versus long-term assets.
B) deciding which fixed assets will be used to produce a tangible product.
C) determining the ideal mix of current assets and current liabilities.
D) choices related to acquiring or disposing of long-term assets.
E) choices related to long-term debt and equity financing.
9) Net working capital is best defined as
A) excess cash on hand.
B) total current assets.
C) current assets minus current liabilities.
D) total assets minus total liabilities.
E) cash and marketable securities.
10) Both the treasurer and the controller of a corporation generally report to the
A) president.
B) board of directors.
C) chief executive officer.
D) chief financial officer.
E) chairperson of the board.
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, Corporate Finance Core Principles and Applications Edition
7 by Ross
11) Which one of the following statements is correct concerning the organizational structure of a
corporation?
A) The vice president of finance reports to the chairperson of the board.
B) The chief operations officer reports to the chief executive officer.
C) The controller reports to the president.
D) The treasurer reports to the chief executive officer.
E) The chief operations officer reports to the vice president of production.
12) The key difference between the responsibilities of the controller and those of the treasurer is
best defined as the separation of duties between
A) managing assets versus managing debt and equity.
B) processing tax records versus accounting records.
C) managing national versus international operations.
D) overseeing production versus marketing activities.
E) maintaining accounting records versus controlling cash.
13) Which position is generally directly responsible for financial planning and capital
expenditures?
A) Controller
B) Treasurer
C) Director
D) Chairperson of the board
E) Chief operations officer
14) Which type of business is the easiest and cheapest to form?
A) Limited partnership
B) Limited liability company
C) General partnership
D) Corporation
E) Sole proprietorship
15) A business entity formed by two or more individuals who each have unlimited liability for
the debts of the business is called a
A) corporation.
B) sole proprietorship.
C) general partnership.
D) limited partnership.
E) limited liability company.
Version 1 3
7 by Ross
CORRECT ANSWERS ARE LOCATED IN THE 2ND HALF OF THIS DOC.
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) Which one of the following items is an intangible asset?
A) A building
B) Accounts receivable
C) Inventory
D) A loan from a creditor
E) A patent
2) Current assets include
A) inventory and cash.
B) cash and buildings.
C) inventory and machinery.
D) equipment and cash.
E) buildings and inventory.
3) Short-term finance
A) ensures sufficient equipment is available to produce the desired amount of product.
B) ensures that long-term debt is acquired at the lowest possible cost.
C) ensures that dividends are paid to all stockholders on an annual basis.
D) balances the amount of company debt with the amount of available equity.
E) is concerned with managing net working capital.
4) Which one of the following is a capital budgeting decision?
A) Deciding whether to build a new distribution center
B) Determining how quickly to pay their accounts payable
C) Determining whether to use short- or long-term liabilities
D) Deciding how many shares of stock to repurchase
E) Determining how much cash to keep on hand
5) The managers in a firm have decided to move the company's headquarters from a rented
space to a new building that the company will purchase. This is an example of
A) a net working capital decision.
B) a capital budgeting decision.
C) a short-term financing decision.
D) a capital structure decision.
E) a cash flow decision.
Version 1 1
,Corporate Finance Core Principles and Applications Edition
7 by Ross
6) Which one of the following actions involves a net working capital decision?
A) Deciding whether to build an apartment building
B) Negotiating whether to lease or buy a new store location
C) Determining whether to issue debt or equity to pay for the firm's expansion
D) Deciding how much inventory to keep on hand
E) Determining whether to replace a fleet of vehicles
7) The process of planning and managing a firm's long-term investments is referred to as
A) capital budgeting.
B) agency cost analysis.
C) financial depreciation.
D) working capital management.
E) capital structure.
8) Capital structure decisions involve
A) determining the ideal mix of current versus long-term assets.
B) deciding which fixed assets will be used to produce a tangible product.
C) determining the ideal mix of current assets and current liabilities.
D) choices related to acquiring or disposing of long-term assets.
E) choices related to long-term debt and equity financing.
9) Net working capital is best defined as
A) excess cash on hand.
B) total current assets.
C) current assets minus current liabilities.
D) total assets minus total liabilities.
E) cash and marketable securities.
10) Both the treasurer and the controller of a corporation generally report to the
A) president.
B) board of directors.
C) chief executive officer.
D) chief financial officer.
E) chairperson of the board.
Version 1 2
, Corporate Finance Core Principles and Applications Edition
7 by Ross
11) Which one of the following statements is correct concerning the organizational structure of a
corporation?
A) The vice president of finance reports to the chairperson of the board.
B) The chief operations officer reports to the chief executive officer.
C) The controller reports to the president.
D) The treasurer reports to the chief executive officer.
E) The chief operations officer reports to the vice president of production.
12) The key difference between the responsibilities of the controller and those of the treasurer is
best defined as the separation of duties between
A) managing assets versus managing debt and equity.
B) processing tax records versus accounting records.
C) managing national versus international operations.
D) overseeing production versus marketing activities.
E) maintaining accounting records versus controlling cash.
13) Which position is generally directly responsible for financial planning and capital
expenditures?
A) Controller
B) Treasurer
C) Director
D) Chairperson of the board
E) Chief operations officer
14) Which type of business is the easiest and cheapest to form?
A) Limited partnership
B) Limited liability company
C) General partnership
D) Corporation
E) Sole proprietorship
15) A business entity formed by two or more individuals who each have unlimited liability for
the debts of the business is called a
A) corporation.
B) sole proprietorship.
C) general partnership.
D) limited partnership.
E) limited liability company.
Version 1 3
