Chapter 5
Introduction to Financial
Management
Quiz Questions
Multiple Choice
1. The choices that individuals and organizations make regarding financial management
are influenced by which of the following?
a. Demand
b. Scarcity
c. Price
d. Only a and c are correct
e. All three—a, b, and c—are correct
2. When sport leagues do not expand into a market that can support a franchise, or when
they create rules to limit the movement of existing franchises, which of the following
economic concepts is being applied?
a. Demand
b. Scarcity
c. Price
d. Equilibrium
e. None of the above
3. When the citizens of Hamilton County, Ohio, decided to raise their taxes to fund two
new sports stadiums rather than to raise taxes for something like improving the
educational system in the county, they missed a chance to improve the educational
system. What is this known as?
a. A marginal cost
b. A fixed cost
c. A variable cost
d. An opportunity cost
e. None of the above
4. The vast majority of for-profit businesses in the United States operate as which of the
following?
a. Sole proprietorships
b. General partnerships
c. Subchapter S corporations
d. Limited liability corporations
e. C corporations
5. The major disadvantages of forming a business under a _____ structure is that there is
double taxation of profits, and the cost of forming the business and operating the
business is higher than other structures.
a. Sole proprietorships
b. General partnerships
c. Subchapter S corporations
d. Limited liability corporations
e. C corporations
6. Which of the following is the depreciation method that is most aggressive at allocating
loss of useful life to the early years of the asset’s use?
a. Straight-line
b. Sum-of-years digits, decelerating deprecation
c. Sum-of-years digits, accelerating depreciation
d. Double-declining balance
e. Units of production
7. Which of the following methods of depreciation attempts to take the non-linear loss of
a fixed asset’s value into account, with depreciation occurring quickly after purchase?
Using this method, the denominator for a fixed asset with a useful life of five years is 15.
a. Straight-line
b. Sum-of-years digits, decelerating deprecation
c. Sum-of-years digits, accelerating depreciation
d. Double-declining balance
e. Units of production
8. Which of the following methods of depreciation attempts to take the non-linear loss of
a fixed asset’s value into account with depreciation occurring late after purchase? Using
this method, the denominator for a fixed asset with a useful life of five years is 15.
a. Straight-line
b. Sum-of-years digits, decelerating deprecation
c. Sum-of-years digits, accelerating depreciation
d. Double-declining balance
e. Units of production
9. What is the interest rate that banks charge their best customers?
a. Discount rate
b. Federal funds rate
c. Prime rate
d. Statement rate
e. None of the above
1. T or F An example of a microeconomic decision that a financial manager might make
would be deciding whether to pay for training for current employees to learn
new job processes.
2. T or F Accounting profit is the profit remaining after the opportunity costs associated
with a financial decision are included.
3. T or F In the sport industry, high school and collegiate athletic departments at public
schools are ultimately operated by the government.
4. T or F The Minnesota Vikings are an example of a community-owned entity in the NFL.
5. T or F In 2015, the National Football League elected to become a non-profit
organization.
6. T or F In an S corp, profits flow through the business to the shareholders and are taxed
only once, as ordinary income to the shareholders.
7. T or F One advantage of a C corp is that there can be an unlimited number of investors.
8. T or F The rate at which banks may borrow money from the Federal Reserve is the
federal funds rate.
9. T or F M1 measures liquid assets like cash, checking and savings accounts, and CDs.
10. T or F The double-declining balance depreciation method aggressively allocates loss of
useful life to the early years of an asset’s use.
Answers to Quiz Questions
Multiple Choice
Answers to True/False