COMPLETE SOLUTION MANUALS
Principles of Finance
s
04/1/22 1
,Principles of Finance
Chapter 1
End-of-Chapter Questions
Introduction to Finance
Multiple Choice Questions
1. Which of the following was NOT identified by your authors as one of the three main areas of
financial study?
A. business finance
B. capital budgeting
C. investments
D. financial markets and institutions
Solution: B
Section 1.1 LO 1 Easy
2. What is the process of determining which long-term or fixed assets to acquire in an effort to
maximize shareholder value?
A. Business finance
B. Capital budgeting
C. Investments
D. Financial markets and institutions
Solution: B
Section 1.1 LO 1 Easy
3. In an organization with each of these financial positions, which title is most likely to be
associated with a job description that is less of a “hands-on” manager and that engages more
in visionary and strategic planning?
A. comptroller (or controller)
B. treasurer
C. vice president of finance
D. chief financial officer (CFO)
Solution: D
Section 1.2 LO 2 Moderate
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,Principles of Finance
4. Which of the following statements is false?
A. Financial planning is an important tool of for-profit organizations such as corporations
and partnerships but is not important for not-for-profit enterprises such charitable
organizations or governments.
B. Good financial planning considers past, present, and pro forma income statements.
C. Balance sheets are critical elements of the financial planning process and help
demonstrate expected sources and uses of funds.
D. Forecasting in the form of expected sales, cost of funds, and micro- and macroeconomic
conditions are essential elements of financial planning.
Solution: A
Section 1.2 LO 2 Easy
5. Which of the following statements regarding data is generally NOT true?
A. Financial data is important for internal and external analysis of business firms.
B. Outsiders use publicly available data about firms to make investment and regulatory
decisions.
C. “Gut feelings” decision-making tends to be more consistent with value maximization.
D. Suppliers need financial information to determine if they should supply trade credit, and
customers need to know if a firm’s products are reliable and appropriately priced.
Solution: C
Section 1.3 LO 1 Easy
6. Which of the following is generally NOT true about cloud data storage versus on-site data
storage?
A. Cloud data storage provides storage cost advantages.
B. Cloud data storage causes increased energy consumption.
C. Cloud data storage comes with specialized data protection services.
D. Cloud data storage comes with specialized maintenance services.
Solution: B
Section 1.3 LO 3 Moderate
7. Which of the following describes United States Bureau of Labor Statistics (BLS) expectations
of jobs using financial skills in the next decade?
A. plentiful but low paying
B. few and low paying
C. plentiful and high paying
D. few and high paying
Solution: C
Section 1.4 LO 1 Easy
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, Principles of Finance
8. Which of the following organizations would be unlikely to hire a financial analyst?
A. Government agencies may hire financial analysts to aid in regulatory oversight and
enforcement.
B. Investment companies may hire financial analysts to produce financial reports.
C. Corporations may hire financial analysts to develop financial forecasts.
D. All of the above organizations are likely to hire and develop financial analysts.
Solution: D
Section 1.4 LO 2 Easy
9. The ________ market is the market for ________ securities, and the ________ is the market
for ________ securities.
A. primary; used; secondary; new
B. primary; new; secondary; used
C. secondary; new; primary; new
D. secondary; used; primary; used
Solution: B
Section 1.5 LO 1 Moderate
10. ________ own the securities that they buy or sell; when they engage in a financial
transaction, they are trading from their own portfolio.
A. Dealers
B. Brokers
C. Advisers
D. Comptrollers
Solution: A
Section 1.5 LO 2 Moderate
11. ________ act as facilitators in a market, and they bring together buyers and sellers for a
transaction.
A. Dealers
B. Brokers
C. Advisers
D. Comptrollers
Solution: B
Section 1.5 LO 2 Moderate
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Principles of Finance
s
04/1/22 1
,Principles of Finance
Chapter 1
End-of-Chapter Questions
Introduction to Finance
Multiple Choice Questions
1. Which of the following was NOT identified by your authors as one of the three main areas of
financial study?
A. business finance
B. capital budgeting
C. investments
D. financial markets and institutions
Solution: B
Section 1.1 LO 1 Easy
2. What is the process of determining which long-term or fixed assets to acquire in an effort to
maximize shareholder value?
A. Business finance
B. Capital budgeting
C. Investments
D. Financial markets and institutions
Solution: B
Section 1.1 LO 1 Easy
3. In an organization with each of these financial positions, which title is most likely to be
associated with a job description that is less of a “hands-on” manager and that engages more
in visionary and strategic planning?
A. comptroller (or controller)
B. treasurer
C. vice president of finance
D. chief financial officer (CFO)
Solution: D
Section 1.2 LO 2 Moderate
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,Principles of Finance
4. Which of the following statements is false?
A. Financial planning is an important tool of for-profit organizations such as corporations
and partnerships but is not important for not-for-profit enterprises such charitable
organizations or governments.
B. Good financial planning considers past, present, and pro forma income statements.
C. Balance sheets are critical elements of the financial planning process and help
demonstrate expected sources and uses of funds.
D. Forecasting in the form of expected sales, cost of funds, and micro- and macroeconomic
conditions are essential elements of financial planning.
Solution: A
Section 1.2 LO 2 Easy
5. Which of the following statements regarding data is generally NOT true?
A. Financial data is important for internal and external analysis of business firms.
B. Outsiders use publicly available data about firms to make investment and regulatory
decisions.
C. “Gut feelings” decision-making tends to be more consistent with value maximization.
D. Suppliers need financial information to determine if they should supply trade credit, and
customers need to know if a firm’s products are reliable and appropriately priced.
Solution: C
Section 1.3 LO 1 Easy
6. Which of the following is generally NOT true about cloud data storage versus on-site data
storage?
A. Cloud data storage provides storage cost advantages.
B. Cloud data storage causes increased energy consumption.
C. Cloud data storage comes with specialized data protection services.
D. Cloud data storage comes with specialized maintenance services.
Solution: B
Section 1.3 LO 3 Moderate
7. Which of the following describes United States Bureau of Labor Statistics (BLS) expectations
of jobs using financial skills in the next decade?
A. plentiful but low paying
B. few and low paying
C. plentiful and high paying
D. few and high paying
Solution: C
Section 1.4 LO 1 Easy
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, Principles of Finance
8. Which of the following organizations would be unlikely to hire a financial analyst?
A. Government agencies may hire financial analysts to aid in regulatory oversight and
enforcement.
B. Investment companies may hire financial analysts to produce financial reports.
C. Corporations may hire financial analysts to develop financial forecasts.
D. All of the above organizations are likely to hire and develop financial analysts.
Solution: D
Section 1.4 LO 2 Easy
9. The ________ market is the market for ________ securities, and the ________ is the market
for ________ securities.
A. primary; used; secondary; new
B. primary; new; secondary; used
C. secondary; new; primary; new
D. secondary; used; primary; used
Solution: B
Section 1.5 LO 1 Moderate
10. ________ own the securities that they buy or sell; when they engage in a financial
transaction, they are trading from their own portfolio.
A. Dealers
B. Brokers
C. Advisers
D. Comptrollers
Solution: A
Section 1.5 LO 2 Moderate
11. ________ act as facilitators in a market, and they bring together buyers and sellers for a
transaction.
A. Dealers
B. Brokers
C. Advisers
D. Comptrollers
Solution: B
Section 1.5 LO 2 Moderate
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