Principles of Finance, 6e
Besley/Brigham
Chapter 01
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© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
1. Which of the following are NOT factors that have made the trend toward globalization mandatory for many
businesses?
a.
Lower trade barriers
b.
Demand for high-quality, low-cost products
c.
Increased volatility of exchange rates for foreign currency
d.
Increased development costs
e.
Improvements in transportation and communications.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Globalization of Business
2. Which of the following is NOT one of the most important trends in managerial finance from the 1990s that continued
into the twenty-first century?
a.
Regulatory attitude of government
b.
Ongoing adaptation of electronic technology
c.
Focus on corporate liquidity
d.
Continued globalization of business
e.
All of the above
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Finance
3. Which of the following statements are true?
a.
The value of any investment is based on the cash flows it is expected to generate in the future.
b.
Investors are not generally risk averse.
c.
Uncertain cash flows are preferred to certain cash flows.
d.
All of the above are true.
e.
None of the above are true.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 3
e.
Answers a, b, and d are correct.
ANSWER:
e
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Investments
7. Which of the following factors is not a mandate toward globalization for many U.S. businesses?
a.
Improvements in transportation and shipping have lowered shipping costs worldwide.
b.
Political clout of consumers has tended to erode barriers designed to protect inefficient manufacturing in other
countries.
c.
With development costs rising, firms must increase unit sales outside the United States to remain competitive.
d.
Firms must be able to produce where costs are lowest.
e.
All of the above are factors.
ANSWER:
e
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Globalization of Business
8. Managerial finance entails making decisions about
a.
Investment portfolios held by individual investors.
b.
The regulation and deregulation of the banking industry.
c.
How businesses acquire and use (invest) funds.
d.
Which corporate stocks and bonds are mispriced in the financial markets.
e.
All of the above.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Finance
9. What major factor(s) led to the U.S. economic woes which started in 2007?
a.
U.S. overseas military engagements.
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 4
b.
A decline in real estate values which resulted in increased mortgage defaults and foreclosures and a decline in
financial markets.
c.
The European economic crisis.
d.
Inflation and manufacturing outsourcing.
e.
None of the above.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Evolution of Finance
10. Why is it important for persons in marketing, accounting, production, and other areas in the firm to understand
finance?
a.
Funds availability affects the firm’s ability to increase inventory, change plant capacity, and so forth.
b.
Financial decisions are based on data provided by other functional areas of the firm; thus, it is in the best
interests of such areas to provide the most optimistic information possible so that their projects seem most
favorable.
c.
There is a good chance persons in marketing, accounting, production, and other areas will have to work in the
finance area someday if they want to move up the corporate ladder.
d.
Payments of salaries and other expenses always pass through the finance area of the firm.
e.
All of the above are correct answers.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Importance of Finance
11. Which of the following is a correct statement?
a.
One of the tasks associated with managerial finance is the decision of when and how the firm should expand,
whether the area of expansion is related to plant and equipment, existing product lines, the production of new
product lines, or the purchase of a new information system to replace an obsolete system.
b.
As business becomes more global, U.S. companies will have a competitive advantage over their foreign
counterparts because the regulatory environment in the United States is much less restrictive than in most
other countries of the world.
c.
The purpose of much of the banking reform that took place in the 1930s was to expand the financial activities
banks could undertake so that they could be more competitive internationally.
Principles of Finance, 6e
Besley/Brigham
Chapter 01
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© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
d.
It wasn’t until the past couple of decades that the analytical tools we use today to evaluate investments were
developed. Prior to the development of such tools, the concept that earnings and dividends are related to stock
prices was unknown.
e.
All of the statements are correct.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Miscellaneous
12. Which of the following statements is not correct?
a.
Prior to the late 1950s and early 1960s, finance was taught primarily as a descriptive, institutional subject
viewed more from the standpoint of an outsider than from that of the management of the firm.
b.
History has shown that the types of investments and methods used to analyze investment opportunities have
changed as the attitudes of both investors and regulators have changed.
c.
When managerial finance emerged as a separate field of study in the early 1900s, the emphasis was on
evaluation and analysis of investments because the economy was in excellent condition at the time, so most
individuals had large sums of funds to invest in corporate securities.
d.
One of the responsibilities of the financial manager is to help determine which assets the firm should acquire
and the best way to finance those assets.
e.
Sustainability is a long-run concept that focuses on improving the quality of life of all stakeholders, both
current and future.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Miscellaneous
13. Which of the following is NOT a concept that you need to understand to make rational financial decisions?
a.
More value is preferred to less value.
b.
Less risky assets are preferred to riskier assets.
c.
Current cash is more valuable than cash in the future.
d.
Discount rate is a decreasing function of risk.
e.
All of the above are needed.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 6
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Management
14. Which of the following is NOT an example of a firm becoming more of a “lean thinker” in its operations?
a.
simplifying financial reporting to avoid providing redundant or useless information
b.
developing products in the most efficient manner
c.
reducing scrap material being generated in the production process
d.
all of the above are examples of “lean thinking”
e.
none of the above are examples of “lean thinking”
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Lean Manufacturing (Finance)
15. Which of the following is consistent with maximizing the value of a firm?
a.
increasing the amount and complexity of financial data reported by the firm
b.
increasing the riskiness of firm
c.
spending large amounts of money perquisites for the managers
d.
following sound sustainable business practices
e.
None of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Sustainability
16. Most people in the United States have a thorough knowledge of finance as evidenced by their having high annual
savings rate and a well-developed retirement plan.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 7
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Perspective
17. The major areas included in the study of finance are financial markets, investments, financial services, and managerial
finance.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Management
18. The major areas included in the study of finance are information technology, investments and managerial finance.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Management
19. The study of finance consists of three areas⎯financial markets, investments, and managerial finance⎯that are basically
independent of each other, because you can be an expert in one area without having knowledge of the other two.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Management
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 8
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
20. Managerial finance refers to analysis and management of one’s investment portfolio.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Finance
21. In general, the role of the financial manager is to plan for the acquisition and use of funds in order to maximize the
value of the firm.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Manager
22. The financial manager interacts jointly with many different individuals and departments within the firm. Forecasting
and planning, as well as coordination and control, are two of the major areas of responsibility where this interaction takes
place.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Financial Manager
23. The financial manager must execute his or her duties independent of the other activities of the firm in order to
properly maximize the value of the firm.
a.
True
b.
False
ANSWER:
False
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Principles of Finance, 6e
Besley/Brigham
Chapter 01
Cengage Learning Testing, Powered by Cognero
Page 12
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Finance
34. During the depression era of the 1930s, the emphasis of managerial finance was developing sophisticated analytical
models used to determine the liquidity and value of firms.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Managerial Finance
35. If you pursue a business career in a nonfinance profession you will not be exposed to finance concepts on the job.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
ACCREDITING STANDARDS:
Blooms Taxonomy-5 – Knowledge
Business Program-6 – Reflective Thinking
DISC-FIN-07 – Finance Function
Time Estimate-a – 5 min.
TOPICS:
Importance of Finance
36. Much of the recent legislation enacted by the government has focused on the regulating of previously unregulated
industries such as financial services and utilities.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
