MULTIPLE CHOICE QUESTIONS

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MULTIPLE CHOICE QUESTIONS

• Finance is the study of how and under what terms
• savings are allocated between lenders and borrowers.
• investments are allocated between investors and brokers.
• institutions with excess money make share purchase decisions.
• households allocate money between spending and saving.

Answer: a

Type: Definition

Difficulty: Easy

Learning Objective: Define finance and explain what is involved in the study of finance.

Section Reference: Finance Defined

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• A financial security is
• a jail term for a financial manager that has committed fraud.
• a contract that is created only when a new stock is issued to the public.
• a financial contract created whenever funds are transferred.
• a contract that is created only when a new bond is first sold.

Answer: c

Type: Definition

Difficulty: Easy

Learning Objective: Define finance and explain what is involved in the study of finance.

Section Reference: Finance Defined

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• Which of the following does NOT appear as an item on Canada’s balance sheet, as presented

in the text?

• non-residential structures
• net worth or equity
• net foreign liabilities
• net foreign assets

Answer: c

Type: Definition

Difficulty: Medium

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

(Introduction to Corporate Finance, 5th Canadian Edition, 5e Laurence Booth, Sean Cleary, Ian Rakita) (Test Bank all Chapters) 1 / 4

• - 3 Test Bank for Introduction to Corporate Finance, Fifth Canadian Edition

Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• Human capital is
• based on only the current skills, but not the education, of a country’s citizens.
• based on only the education, but not the current skills, of a country’s citizens.
• based on the skills and education of citizens and should be included in a country’s wealth.
• difficult to measure and should therefore not be included in a country’s wealth.

Answer: c

Type: Definition

Difficulty: Easy

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• Which of the following items is NOT a real asset?
• land
• television
• bond
• gold mine

Answer: c

Type: Definition

Difficulty: Easy

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• In the following list, which item is a financial asset?
• land
• bond
• building
• inventory

Answer: b

Type: Definition

Difficulty: Easy

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets 2 / 4

An Introduction to Finance 1 - 4

Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited 4

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• What is the main difference between real assets and financial assets?

a) Real assets are tangible and financial assets are intangible.

b) Real assets have known values, while the values of financial assets are not known.

c) Real assets are intangible and financial assets are tangible.

d) Real assets have unknown values, while the values of financial assets are known.

Answer: a

Type: Definition

Difficulty: Easy

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Blooms: Knowledge

AACSB: Analytic

CPA: Finance

• If Canadian households, in aggregate, own real assets with a market value of $3.194 trillion,

and also own net financial assets with a market value of $2.344 trillion, the total net assets of Canadian households have a market value of

• $3.194 trillion
• $5.538 trillion
• $–0.850 trillion
• $0.850 trillion

Answer: b

Type: Calculation

Difficulty: Easy

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Feedback: $5.538 = $3.194 + $2.344

Blooms: Application

AACSB: Analytic

CPA: Finance

• Given the following hypothetical information regarding the real and financial assets in Canada

for 2022 (numbers in $ billions):

Real Assets Net Financial Assets Government 677 –658 Business 2,202 –1,635 Households 3,194 2,344

• / 4

• - 5 Test Bank for Introduction to Corporate Finance, Fifth Canadian Edition

Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited What is the value of the total net assets in Canada for 2022?

• $5,842 billion
• $6,086 billion
• $6,124 billion
• $6,105 billion

Answer: c

Type: Calculation

Difficulty: Medium

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Feedback: $6,124 = $677 + $2,202 + $3,194 – $658 – $1,635 + $2,344

Blooms: Application

AACSB: Analytic

CPA: Finance

• You are provided with the following hypothetical information regarding the real and financial

assets in Canada for 2022 (numbers in $ billions):

Real Assets Net Financial Assets Government 677 –658 Business 2,202 –1,635 Households 3,194 2,344

What is the value of the net financial assets owned by non-residents for 2022?

• $901 billion
• $51 billion
• $2,293 billion

d) There is not enough information to answer the question.

Answer: b

Type: Calculation

Difficulty: Difficult

Learning Objective: List the major financial and real assets held by Canadians.

Section Reference: Real versus Financial Assets

Feedback: $51 billion = $2,344 – $658 – $1,635. The value of net financial assets held by non- residents is equal to the negative of the sum of the net financial assets of government, businesses, and households.

Blooms: Application

AACSB: Analytic

CPA: Finance

• Which of the following sectors is NOT a user of savings in the economy?
• business sector
• household sector
• government sector
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