1. Which one of the following terms is defined as the management of a firm’s long–
term investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital structure
2. Which one of the following terms is defined as the mixture of a firm’s debt and
equity financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure
3. Which one of the following is defined as a firm’s short-term assets and its short-
term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital structure
4. Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment?
A. I and IV only
B. II and III only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
5. Which one of the following is a capital budgeting decision?
A. determining how many shares of stock to issue
B. deciding whether or not to purchase a new machine for the production line
C. deciding how to refinance a debt issue that is maturing
D. determining how much inventory to keep on hand
E. determining how much money should be kept in the checking account
6. Which one of the following is a capital structure decision?
A. determining which one of two projects to accept
B. determining how to allocate investment funds to multiple projects
C. determining the amount of funds needed to finance customer purchases of a new product
D. determining how much debt should be assumed to fund a project
E. determining how much inventory will be needed to support a project
7. Which one of the following functions should be the responsibility of the controller rather
than the treasurer?
A. daily cash deposit
B. income tax returns
C. equipment purchase analysis
D. customer credit approval
E. payment to a vendor
8. The controller of a corporation generally reports directly to the:
A. board of directors.
B. chairman of the board.
C. chief executive officer.
D. president.
E. vice president of finance.
9. The decision to issue additional shares of stock is an example of which one of the
following?
