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1 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Finance, 5e (Cornett) Chapter 1 Introduction to Financial Management
1) Which statements(s) is/are true for successful application of financial theories?
- The economy will be more productive.
- Individual's wealth will grow.
- A and B are true.
- None of the above.
Answer: C
Difficulty: 1 Easy
Topic: Financial theories
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
2) Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors?
- retained earnings
- taxes
- dividends
Answer: C
Difficulty: 1 Easy
Topic: Dividends and pay out policy
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
(Finance Applications and Theory, 5e Marcia Millon Cornett, Troy Adair, John Nofsinger) (Test Bank all Chapters) 1 / 4
2 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.3) This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.
- real markets
- investments
- financial management
Answer: B
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
4) This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings.
- investments
- financial management
- financial institutions and markets
Answer: B
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
5) Financial management involves decisions about which of the following?
- which projects to fund
- how to minimize taxation
- what type of capital should be raised
- all of these choices are correct.
Answer: D
Difficulty: 1 Easy
Topic: Financial management decisions
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
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3 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6) This subarea of finance helps facilitate the capital flows between investors and companies.
- investments
- financial management
- treasury management
- financial institutions and markets
Answer: D
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
7) This subarea of finance is important for adapting to the global economy.
- investments
- financial management
- international finance
- financial institutions and markets
Answer: C
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
8) A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called
- options.
- standard deviation.
- coefficient of variation.
- risk.
Answer: D
Difficulty: 1 Easy
Topic: Risks and returns
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
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4 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.9) This is a term to describe non-physical assets like stocks and bonds that get their value from future cash flows.
- investment
- financial asset
- real asset
- financial markets
Answer: B
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember; Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
10) Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations?
- investments
- asset classes
- market instruments
- financial markets
Answer: B
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
11) The most commonly accepted groups of asset classes include all of the following except
- stocks.
- bonds.
- machinery and equipment.
- real estate.
Answer: C
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
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