Principals of Finance - C708 – Pre-Assessment (PPBO)
An Introduction to Finance
1. The credit manager for a company is responsible for setting the company’s credit policy regarding availability and limits for
customers.
What is one of the additional responsibilities of this credit manager?
YOUR CORRECT
ANSWER ANSWER
Investing excess cash
Collecting past-due accounts
Monitoring accounts payable
Purchasing insurance
2. Which activity is financial management responsible for?
YOUR CORRECT
ANSWER ANSWER
Ensuring sufficient financing is available
Verifying the balance sheet is properly constructed
Reporting past earnings for shares of stock
Researching different products to bring to market
3. What is one of the main areas of the financial environment?
YOUR CORRECT
ANSWER ANSWER
Investments
Human resources
Marketing
Foreign relations
, YOUR CORRECT
ANSWER ANSWER
4. What is a common challenge in the world of finance?
YOUR CORRECT
ANSWER ANSWER
It generally operates with a high degree of uncertainty.
It causes investor anxiety due to a volatile stock market.
It is difficult to abide by generally accepted accounting principles (GAAP).
It has to comply with banking regulations that are subject to change.
5. Which variable must be considered when a corporation's finance department is determining the best strategy for financing a
project?
YOUR CORRECT
ANSWER ANSWER
The amount of debt and equity financing currently in use
The bid-ask spread for the company’s stock
Recent changes to the federal funds rate
The amount of trade credit from suppliers for the project
Relating Finance to Business
6. An individual is interested in establishing a lawn care business as a sole proprietorship.
What will be a disadvantage of choosing this business model?
YOUR CORRECT
ANSWER ANSWER
Unlimited liability
Frozen investments
Government regulations
Management disagreements
7. What is one benefit of a sole proprietorship?
YOUR CORRECT
ANSWER ANSWER
The owner has uninterrupted control of the business.
, YOUR CORRECT
ANSWER ANSWER
The personal assets of stockholders are protected.
The company can continue to exist with the death of the owner.
The business is taxed separately from the owner’s personal taxes.
8. What is a disadvantage of a general partnership?
YOUR CORRECT
ANSWER ANSWER
Owners' personal assets are not protected against claims of creditors.
Losses from the business are deductible on an individual’s tax return.
Complex business filing paperwork is required.
Annual reports must be filed to shareholders.
9. What is one advantage of an LLC?
YOUR CORRECT
ANSWER ANSWER
Flexibility in obtaining funding from venture capitalists
Limited personal liability
Membership interest not easily transferable
Number of members fixed at 100
10. What is an example of a potential principal-agent problem?
YOUR CORRECT
ANSWER ANSWER
Corporate executives buying other companies to expand their influence
Disagreement among managers on the direction of their firm
Missing revenue estimates during a recession
Changing the company’s dividend policy to bolster stock values
The financial Market Environment
11. An individual decides to sell corporate bonds to another investor.
Which type of financial market or institution would be involved in this transaction?
An Introduction to Finance
1. The credit manager for a company is responsible for setting the company’s credit policy regarding availability and limits for
customers.
What is one of the additional responsibilities of this credit manager?
YOUR CORRECT
ANSWER ANSWER
Investing excess cash
Collecting past-due accounts
Monitoring accounts payable
Purchasing insurance
2. Which activity is financial management responsible for?
YOUR CORRECT
ANSWER ANSWER
Ensuring sufficient financing is available
Verifying the balance sheet is properly constructed
Reporting past earnings for shares of stock
Researching different products to bring to market
3. What is one of the main areas of the financial environment?
YOUR CORRECT
ANSWER ANSWER
Investments
Human resources
Marketing
Foreign relations
, YOUR CORRECT
ANSWER ANSWER
4. What is a common challenge in the world of finance?
YOUR CORRECT
ANSWER ANSWER
It generally operates with a high degree of uncertainty.
It causes investor anxiety due to a volatile stock market.
It is difficult to abide by generally accepted accounting principles (GAAP).
It has to comply with banking regulations that are subject to change.
5. Which variable must be considered when a corporation's finance department is determining the best strategy for financing a
project?
YOUR CORRECT
ANSWER ANSWER
The amount of debt and equity financing currently in use
The bid-ask spread for the company’s stock
Recent changes to the federal funds rate
The amount of trade credit from suppliers for the project
Relating Finance to Business
6. An individual is interested in establishing a lawn care business as a sole proprietorship.
What will be a disadvantage of choosing this business model?
YOUR CORRECT
ANSWER ANSWER
Unlimited liability
Frozen investments
Government regulations
Management disagreements
7. What is one benefit of a sole proprietorship?
YOUR CORRECT
ANSWER ANSWER
The owner has uninterrupted control of the business.
, YOUR CORRECT
ANSWER ANSWER
The personal assets of stockholders are protected.
The company can continue to exist with the death of the owner.
The business is taxed separately from the owner’s personal taxes.
8. What is a disadvantage of a general partnership?
YOUR CORRECT
ANSWER ANSWER
Owners' personal assets are not protected against claims of creditors.
Losses from the business are deductible on an individual’s tax return.
Complex business filing paperwork is required.
Annual reports must be filed to shareholders.
9. What is one advantage of an LLC?
YOUR CORRECT
ANSWER ANSWER
Flexibility in obtaining funding from venture capitalists
Limited personal liability
Membership interest not easily transferable
Number of members fixed at 100
10. What is an example of a potential principal-agent problem?
YOUR CORRECT
ANSWER ANSWER
Corporate executives buying other companies to expand their influence
Disagreement among managers on the direction of their firm
Missing revenue estimates during a recession
Changing the company’s dividend policy to bolster stock values
The financial Market Environment
11. An individual decides to sell corporate bonds to another investor.
Which type of financial market or institution would be involved in this transaction?
