Ross, Essentials of Corporate Finance, Fifth Edition Chapter 01 Testbank
Chapter 01 Testbank
1. The primary market refers to:
A. the original sale of securities by the issuer.
B. transactions between two institutional shareholders.
C. the sale of securities by an individual shareholder.
D. the first trade of a firm's securities when the financial markets open in the morning.
2. The most important function of a financial market is:
A. to facilitate the flow of funds between lenders and borrowers.
B. to provide a market for shares.
C. to provide information about an issuing company's financial situation.
D. to secure profits for brokers and agents.
3. A primary financial market is one that:
A. involves the sale of existing securities.
B. offers securities with the highest expected return.
C. offers the greatest choice of shares and debentures.
D. involves the sale of securities for the first time.
4. Secondary markets:
A. allow borrowers to raise long-term funds.
B. facilitate capital-raising in the primary market.
C. allow borrowers to raise short-term funds.
D. all of the answers options are correct.
5. A corporation:
A. can neither sue another party nor be sued.
B. may not own property.
C. may enter into contracts to borrow funds.
D. can issue its own shares but cannot purchase shares in another entity.
6. The amount of debt and equity used by a firm to finance its operations is called the firm's:
A. debt ratio.
B. working capital ratio.
C. capital structure.
D. financial position.
Chapter 01 Testbank
1. The primary market refers to:
A. the original sale of securities by the issuer.
B. transactions between two institutional shareholders.
C. the sale of securities by an individual shareholder.
D. the first trade of a firm's securities when the financial markets open in the morning.
2. The most important function of a financial market is:
A. to facilitate the flow of funds between lenders and borrowers.
B. to provide a market for shares.
C. to provide information about an issuing company's financial situation.
D. to secure profits for brokers and agents.
3. A primary financial market is one that:
A. involves the sale of existing securities.
B. offers securities with the highest expected return.
C. offers the greatest choice of shares and debentures.
D. involves the sale of securities for the first time.
4. Secondary markets:
A. allow borrowers to raise long-term funds.
B. facilitate capital-raising in the primary market.
C. allow borrowers to raise short-term funds.
D. all of the answers options are correct.
5. A corporation:
A. can neither sue another party nor be sued.
B. may not own property.
C. may enter into contracts to borrow funds.
D. can issue its own shares but cannot purchase shares in another entity.
6. The amount of debt and equity used by a firm to finance its operations is called the firm's:
A. debt ratio.
B. working capital ratio.
C. capital structure.
D. financial position.
