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| 1 | |
Shareholders' equity is best defined as: |
| | A) | the total market value of a firm's assets. |
| | B) | the summation of the net profits retained by a firm from its inception. |
| | C) | a residual claim on the value of a firm's assets after the firm's debts have been paid. |
| | D) | the total amount received by a firm from the sale of equity securities. |
| | E) | the distribution of a firm's profits to its shareholders. |
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| 2 | |
Finance includes decisions related to a firm's: |
| | A) | net working capital, such as determining the appropriate amount of long-term debt to be acquired to finance a new capital project. |
| | B) | capital budgeting, such as determining the optimal level of inventory. |
| | C) | capital structure, such as determining the extent to which debt should be used to finance the firm's operations. |
| | D) | capital expenditures, such as deciding when a supplier should be paid. |
| | E) | net working capital, such as determining the amount to be distributed as a dividend. |
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| 3 | |
The ideal capital structure for a firm is the mixture of debt and equity that: |
| | A) | equates the level of debt to the level of equity. |
| | B) | minimizes the long-term debt. |
| | C) | minimizes the annual interest expense. |
| | D) | maximizes both the level of debt and the level of equity. |
| | E) | maximizes the value of the firm. |
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| 4 | |
Which one of the following functions should be assigned to the controller, rather than the treasurer? |
| | A) | cash management |
| | B) | financial planning |
| | C) | capital expenditure |
| | D) | tax planning |
| | E) | credit management |
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| 5 | |
Which one of the following best describes the top priority for a financial manager? |
| | A) | maximize the current accounting profits by utilizing the most favorable accounting methods |
| | B) | minimize the level of inventory held by the firm |
| | C) | reduce the net working capital of the firm |
| | D) | create value from a firm's activities by generating greater cash inflows than cash outflows |
| | E) | minimizing the total amount of taxes which the firm must pay |
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| 6 | |
The treasurer and controller generally report to the: |
| | A) | president. |
| | B) | chief executive officer (CEO). |
| | C) | board of directors. |
| | D) | chief financial officer (CFO). |
| | E) | chief operations officer (COO). |
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| 7 | |
The allocation of manufacturing costs to various units of production is a function which is assigned to the: |
| | A) | treasurer. |
| | B) | corporate director. |
| | C) | controller. |
| | D) | chairman of the board. |
| | E) | vice president of operations. |
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| 8 | |
Capital budgeting is the process of: |
| | A) | determining how to raise the money required to fund a project. |
| | B) | choosing how much cash to keep on hand. |
| | C) | deciding the amount of earnings that should be distributed to shareholders. |
| | D) | managing a firm's long-term assets. |
| | E) | deciding which marketable securities to purchase. |
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| 9 | |
Most investors prefer cash _____ and have a(n) _____ risk. |
| | A) | sooner rather than later; preference for |
| | B) | sooner rather than later; aversion to |
| | C) | sooner rather than later; neutral stance towards |
| | D) | later rather than sooner; preference for |
| | E) | later rather than sooner; aversion to |
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| 10 | |
The cash flows from a firm can be distributed to:
I. shareholders.
II. debtholders.
III. the government.
IV. the firm itself. |
| | A) | I only |
| | B) | I and II only |
| | C) | I and III only |
| | D) | I, III, and IV only |
| | E) | I, II, III, and IV |
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