Question 1

Which of the following is not one of the basic corporate finance functions?

A. Preparing Financial Statements

B. Evaluating project investment proposals

C. Risk management

D. Collecting funds for the business

Question 2

Which of the following is false regarding debt capital?

A. Debt holders receive interest payments at fixed intervals.

B. Debt holders receive the amount of their loan (principal) at the debt's maturity date.

C. Debt holders can force the company into bankruptcy if interest payments are not made.

D. Debt holders have voting rights for the company's board of directors.

Question 3

Which of the following is NOT a weakness of a sole proprietorship business?

A. Limited liability

B. Unlimited life

C. Easy to form

D. Unlimited access to capital

Question 4

Which form of invested capital has the minimum exposure to a company's business and financial risk?

A. Equity capital

B. Debt capital

C. Reserved capital

D. Intellectual capital

Question 5

If you invest certain amount @ 2% return:

a. future value will be same as the amount invested

b. future value will exceed the amount invested

c. present value will always exceed future value

d. future value will be two times higher than future value

Question 6

You have the choice between two investments that have the same maturity and the same nominal return. Investment A pays simple interest. Investment B pays compounded interest. Which one should you pick?

A. Investment A, because it has a higher effective annual return

B. Investment A, because it is simple to calculate the return

C. Investment B, because it has higher effective annual return

D. Investment B, because you like the concept of compound interest.