Exam
Name___________________________________
TRUE/FALSE. Write ʹTʹ if the statement is true and ʹFʹ if the statement is false.
1) A financial analyst is responsible for maintaining and controlling the firmʹs daily cash balances. He 1)
or she frequently manages the firmʹs short-term investments and coordinates short-term
borrowing and banking relationships.
2) Finance is concerned with the process institutions, markets, and instruments involved in the 2)
transfer of money among and between individuals, businesses and government.
3) Financial services is concerned with the duties of the financial manager. 3)
4) Financial managers actively manage the financial affairs of many types of business--financial and 4)
non-financial, private and public, for-profit and not-for-profit.
5) In a partnership, owners have unlimited liability and may have to cover debts of other less 5)
financially sound partners.
6) In a partnership, a partner can readily transfer his/her wealth to other partners. 6)
7) The board of directors is responsible for managing day-to-day operations and carrying out the 7)
policies established by the chief executive officer.
8) The sole proprietor has unlimited liability; only his or her total investment in the business can be 8)
taken to satisfy creditors.
9) In a limited partnership, only one partner may assume limited liability, all other partners have to 9)
have unlimited liability.
10) The president or chief executive officer is elected by the firmʹs stockholders and has ultimate 10)
authority to guide corporate affairs and make general policy.
11) In a limited partnership, partnersʹ liabilities are limited to their investment in the partnership. 11)
12) In a limited partnership, the liability protection does not protect partners from their individual acts 12)
of malpractice.
13) The capital expenditures analyst/manager is responsible for the evaluation and recommendation of 13)
proposed asset investments and may be involved in the financial aspects of implementation of
approved investments.
14) The financial analyst administers the firmʹs credit policy by analyzing or managing the evaluation 14)
of credit applications, extending credit, and monitoring and collecting accounts receivable.
15) In large companies, the project finance manager is responsible for coordinating the assets and 15)
liabilities of the employeesʹ pension fund.
1
,16) Marginal analysis states that financial decisions should be made and actions taken only when 16)
added benefits exceeds added costs.
17) The controller typically handles the accounting activities, such as tax management, data processing, 17)
and cost and financial accounting.
18) The financial manager places primary emphasis on cash flows, the inflow and outflow of cash. 18)
19) Managerial finance is concerned with the design and delivery of advice and financial products to 19)
individuals, businesses, and government.
20) The treasurer typically handles the cost and financial accounting. 20)
21) Accrual method recognizes revenue at the point of sale and recognizes expenses when incurred. 21)
22) The accountant evaluates financial statements, develops additional data, and makes decisions 22)
based on his or her assessment of the associated returns and risks.
23) The treasurer is the officer responsible for the firmʹs accounting activities, such as corporate 23)
accounting, tax management, financial accounting, and cost accounting.
24) The controller is the officer responsible for the firmʹs financial activities such as financial planning 24)
and fund raising, making capital expenditure decisions, and managing cash, credit, the pension
fund, and foreign exchange.
25) High cash flow is generally associated with a higher share price whereas higher risk tends to result 25)
in a lower share price.
26) The treasurerʹs focus tends to be more external, while the controllerʹs focus is more internal. 26)
27) The financial manager prepares financial statements that recognize revenue at the point of sale and 27)
expenses when incurred.
28) Using certain standardized and generally accepted accounting principles, the accountant prepares 28)
financial statements that recognize revenue at the point of sale and expenses when incurred.
29) The financial manager must look beyond financial statements to obtain insight into developing or 29)
existing problems since the accrual accounting data do not fully describe the circumstances of a
firm.
30) When considering each financial decision alternative or possible action in terms of its impact on the 30)
share price of the firmʹs stock, financial managers should accept only those actions that are
expected to increase the firmʹs short-term profitability.
31) Financial analysis and planning is concerned with analyzing the mix of assets and liabilities. 31)
32) Financing decisions deal with the left-hand side of the firmʹs balance sheet and involve the most 32)
appropriate mix of current and fixed assets.
2
, 33) The goal of ethics is to motivate business and market participants to adhere to both the letter and 33)
the spirit of laws and regulations in all aspects of business and professional practice.
34) To achieve the goal of profit maximization, for each alternative being considered, the financial 34)
manager would select the one that is expected to result in the highest monetary return.
35) Dividend payments change directly with changes in earnings per share. 35)
36) The wealth of corporate owners is measured by the share price of the stock. 36)
37) The Economic Value Added (EVA) is the difference between the cost of funds used to finance an 37)
investment and its after-tax operating profits.
38) Economic value added is calculated by subtracting the cost of funds used to finance an investment 38)
from its after-tax operating profits.
39) Return and risk are the key determinants of share price, which represents the wealth of the owners 39)
in the firm.
40) A high eps does not necessarily translate into a high stock price. 40)
41) The profit maximization goal ignores the timing of returns, does not directly consider cash flows, 41)
and ignores risk.
42) When considering each financial decision alternative or possible action in terms of its impact on the 42)
share price of the firmʹs stock, financial managers should accept only those actions that are
expected to increase share price.
43) Higher risk tends to result in a higher share price since the stockholder must be compensated for 43)
the greater risk.
44) Where risk is involved, stockholders expect to earn higher rates of return on investments of lower 44)
risk and vice versa.
45) The likelihood that managers may place personal goals ahead of corporate goals is called agency 45)
problem.
46) Agency costs are the reduction in shareholders’ wealth when managers act to maximize their own 46)
wealth instead of shareholder wealth.
47) Agents of corporate owners are themselves owners of the firm and have been elected by all the 47)
corporate owners to represent them in decision-making and management of the firm.
48) An agency problem is the acquisition of a firm by another firm or group that is not supported by 48)
management.
49) Market forces and agency costs help to prevent or minimize agency problems. 49)
3
Name___________________________________
TRUE/FALSE. Write ʹTʹ if the statement is true and ʹFʹ if the statement is false.
1) A financial analyst is responsible for maintaining and controlling the firmʹs daily cash balances. He 1)
or she frequently manages the firmʹs short-term investments and coordinates short-term
borrowing and banking relationships.
2) Finance is concerned with the process institutions, markets, and instruments involved in the 2)
transfer of money among and between individuals, businesses and government.
3) Financial services is concerned with the duties of the financial manager. 3)
4) Financial managers actively manage the financial affairs of many types of business--financial and 4)
non-financial, private and public, for-profit and not-for-profit.
5) In a partnership, owners have unlimited liability and may have to cover debts of other less 5)
financially sound partners.
6) In a partnership, a partner can readily transfer his/her wealth to other partners. 6)
7) The board of directors is responsible for managing day-to-day operations and carrying out the 7)
policies established by the chief executive officer.
8) The sole proprietor has unlimited liability; only his or her total investment in the business can be 8)
taken to satisfy creditors.
9) In a limited partnership, only one partner may assume limited liability, all other partners have to 9)
have unlimited liability.
10) The president or chief executive officer is elected by the firmʹs stockholders and has ultimate 10)
authority to guide corporate affairs and make general policy.
11) In a limited partnership, partnersʹ liabilities are limited to their investment in the partnership. 11)
12) In a limited partnership, the liability protection does not protect partners from their individual acts 12)
of malpractice.
13) The capital expenditures analyst/manager is responsible for the evaluation and recommendation of 13)
proposed asset investments and may be involved in the financial aspects of implementation of
approved investments.
14) The financial analyst administers the firmʹs credit policy by analyzing or managing the evaluation 14)
of credit applications, extending credit, and monitoring and collecting accounts receivable.
15) In large companies, the project finance manager is responsible for coordinating the assets and 15)
liabilities of the employeesʹ pension fund.
1
,16) Marginal analysis states that financial decisions should be made and actions taken only when 16)
added benefits exceeds added costs.
17) The controller typically handles the accounting activities, such as tax management, data processing, 17)
and cost and financial accounting.
18) The financial manager places primary emphasis on cash flows, the inflow and outflow of cash. 18)
19) Managerial finance is concerned with the design and delivery of advice and financial products to 19)
individuals, businesses, and government.
20) The treasurer typically handles the cost and financial accounting. 20)
21) Accrual method recognizes revenue at the point of sale and recognizes expenses when incurred. 21)
22) The accountant evaluates financial statements, develops additional data, and makes decisions 22)
based on his or her assessment of the associated returns and risks.
23) The treasurer is the officer responsible for the firmʹs accounting activities, such as corporate 23)
accounting, tax management, financial accounting, and cost accounting.
24) The controller is the officer responsible for the firmʹs financial activities such as financial planning 24)
and fund raising, making capital expenditure decisions, and managing cash, credit, the pension
fund, and foreign exchange.
25) High cash flow is generally associated with a higher share price whereas higher risk tends to result 25)
in a lower share price.
26) The treasurerʹs focus tends to be more external, while the controllerʹs focus is more internal. 26)
27) The financial manager prepares financial statements that recognize revenue at the point of sale and 27)
expenses when incurred.
28) Using certain standardized and generally accepted accounting principles, the accountant prepares 28)
financial statements that recognize revenue at the point of sale and expenses when incurred.
29) The financial manager must look beyond financial statements to obtain insight into developing or 29)
existing problems since the accrual accounting data do not fully describe the circumstances of a
firm.
30) When considering each financial decision alternative or possible action in terms of its impact on the 30)
share price of the firmʹs stock, financial managers should accept only those actions that are
expected to increase the firmʹs short-term profitability.
31) Financial analysis and planning is concerned with analyzing the mix of assets and liabilities. 31)
32) Financing decisions deal with the left-hand side of the firmʹs balance sheet and involve the most 32)
appropriate mix of current and fixed assets.
2
, 33) The goal of ethics is to motivate business and market participants to adhere to both the letter and 33)
the spirit of laws and regulations in all aspects of business and professional practice.
34) To achieve the goal of profit maximization, for each alternative being considered, the financial 34)
manager would select the one that is expected to result in the highest monetary return.
35) Dividend payments change directly with changes in earnings per share. 35)
36) The wealth of corporate owners is measured by the share price of the stock. 36)
37) The Economic Value Added (EVA) is the difference between the cost of funds used to finance an 37)
investment and its after-tax operating profits.
38) Economic value added is calculated by subtracting the cost of funds used to finance an investment 38)
from its after-tax operating profits.
39) Return and risk are the key determinants of share price, which represents the wealth of the owners 39)
in the firm.
40) A high eps does not necessarily translate into a high stock price. 40)
41) The profit maximization goal ignores the timing of returns, does not directly consider cash flows, 41)
and ignores risk.
42) When considering each financial decision alternative or possible action in terms of its impact on the 42)
share price of the firmʹs stock, financial managers should accept only those actions that are
expected to increase share price.
43) Higher risk tends to result in a higher share price since the stockholder must be compensated for 43)
the greater risk.
44) Where risk is involved, stockholders expect to earn higher rates of return on investments of lower 44)
risk and vice versa.
45) The likelihood that managers may place personal goals ahead of corporate goals is called agency 45)
problem.
46) Agency costs are the reduction in shareholders’ wealth when managers act to maximize their own 46)
wealth instead of shareholder wealth.
47) Agents of corporate owners are themselves owners of the firm and have been elected by all the 47)
corporate owners to represent them in decision-making and management of the firm.
48) An agency problem is the acquisition of a firm by another firm or group that is not supported by 48)
management.
49) Market forces and agency costs help to prevent or minimize agency problems. 49)
3
