1.1
Finance: An Overview
1)
Which of the following statements best represents what finance is about?
A)
How political, social, and economic forces affect corporations
B)
Maximizing profits
C)
The study of how people and businesses make investment decisions and how to finance those
decisions
D)
Reducing risk
2)
From a financial point of view, a company that decides to develop new product is making
A)
a financing
decision.
B) an
investment decision.
C)
a capital structure decision.
D)
a cash flow decision.
3)
Working capital management refers to
A)
long-term financing
decisions. B) the management
of cash flows.
C)
investing in product development.
D)
capital structure.
4)
Finance managers need to interact constantly with
A)
marketing managers.
B)
accounting staff.
C)
management information systems
staff. D) all of the above.
5)
The personal decision to obtain a college degree in business is primarily a(n) decision.
A)
social
B)
investment
C)
ethical
D)
financing
6)
The area of finance that deals with long-term investment decisions is known as
A)
capital structure.
B)
working capital management.
C)
financial
strategy. D)
capital budgeting.
7)
Capital structure refers to the financing of long-term
investments. Answer: TRUE
8)
Business financial decisions are fundamentally different from personal financial
decisions. Answer: FALSE
9)
What are the three basic questions addressed by the study of
investments? Answer:
1.
What investments should the firm undertake?
2.
How should the firm fund these investments?
3.
How can the firm best manage cash flows in its day-to-day operations?
1.2
Three Types of Business
1)
Which of the following is NOT an advantage of the sole
proprietorship? A) Limited liability
B)
No time limit imposed on its existence
C)
No legal requirements for starting the business
D)
None of the above
2)
What is the chief disadvantage of the sole proprietorship as a form of business
