Question 1(0.2 points)

Saved

A primary market is any financial market in which owners of outstanding securities can resell them to other investors.

Question 1 options:

TrueFalse

Question 2(0.2 points)

Saved

Money market instruments are generally issued by

Question 2 options:

firms in dire need of cash to maintain their credit rating.

firms of the highest credit rating.

all of these.

firms of the lower credit ratings.

Question 3(0.2 points)

Equities with maturity of greater than one year are generally traded in the capital market.

Question 3 options:

TrueFalse

Question 4(0.2 points)

The real rate of return can be justified, at a basic level, by

Question 4 options:

compensation for inflation.

compensation for the level of international borrowing.

compensation for deferring consumption.

all of these.

Question 5(0.2 points)

Financial markets in which equity and debt instruments with maturities greater than one year are traded are called

Question 5 options:

money markets.

Over the counter exchange.

none of these.

capital markets.

Question 6(0.2 points)

The law that prohibited commercial banks from engaging investment banking activities is the Financial Services Modernization Act of 1999.

Question 6 options:

TrueFalse

Question 7(0.2 points)

In the United States, the real rate of interest has historically been around

Question 7 options:

1 percent.

3 percent.

5 percent.

7 percent.

Question 8(0.2 points)

The nominal rate of interest is made up of

Question 8 options:

a commodity cross-index return.

compensation for inflation.

both the real rate of interest and compensation for inflation.

the real rate of interest.

Question 9(0.2 points)

A privately held corporation securing a loan from its regional commercial bank is an example of a direct market transaction.

Question 9 options:

TrueFalse

Question 10(0.2 points)

A society's ideas about what actions are right and wrong are termed as

Question 10 options:

ethics.

laws.

rules and policies.

unwritten laws.

Question 11(0.2 points)

A good capital budgeting decision is

Question 11 options:

one in which the benefits of the project are equal to the cost of the asset.

one in which the benefits of the project are less than the cost of the asset.

one in which the benefits of the project are more than the cost of the asset.

all of these.

Question 12(0.2 points)

The cash remaining with the firm after paying its operating expenses, making payments to creditors, and taxes is called

Question 12 options:

residual cash flows.

capital contributed in excess of par.

earnings per share.

assets.

Question 13(0.2 points)

The external auditors of the firm report their findings directly to the CFO of the firm.

Question 13 options:

TrueFalse

Question 14(0.2 points)

Governments are the principal lender-savers in the economy.

Question 14 options:

TrueFalse

Question 15(0.2 points)

An economy with a large flow of funds requires

Question 15 options:

an efficient financial system.

all of these.

a frictionless market.

a lot of gold reserves.

Question 16(0.2 points)

Intangible assets generate most of a manufacturing firm's cash flows.

Question 16 options:

TrueFalse

Question 17(0.2 points)

If your firm primarily borrows from commercial banks, then it primarily accesses the capital markets through

Question 17 options:

direct financing.

a legal loophole that allows all commercial banks the ability to underwrite securities.

none of these.

indirect financing.

Question 18(0.2 points)

Which of the following markets has no central trading location?

Question 18 options:

An auction market

An over-the-counter market

A futures exchange

None of these.

Question 19(0.2 points)

Who among the following is responsible for setting an agenda at meetings of the board of directors?

Question 19 options:

Chairperson of the board of directors

Nominating committee

President

Manager

Question 20(0.2 points)

A good capital budgeting or investment decision is one in which the benefits are worth more to the firm than the cost of the asset.

Question 20 options:

TrueFalse

Question 21(0.2 points)

Corporations hold the majority of all business assets and generate the majority of business revenues and profits in the United States.

Question 21 options:

TrueFalse

Question 22(0.2 points)

A patent is a productive asset for a technology-based firm.

Question 22 options:

TrueFalse

Question 23(0.2 points)

Which of the following is a basic source of funds for a firm?

Question 23 options:

Asset liquidations

Both debt and equity

Debt

Equity

Question 24(0.2 points)

A director who is not an employee of the firm is called

Question 24 options:

an inside director.

an independent director.

an executive director.

an official director.

Question 25(0.2 points)

Which of the following theories states that security prices reflect all information, whether public or private?

Question 25 options:

Strong-form efficiency

Semistrong-form efficiency

Weak-form efficiency

Nominal-form efficiency

Question 26(0.2 points)

Businesses are the principal borrower-spenders in the economy.

Question 26 options:

TrueFalse

Question 27(0.2 points)

The NYSE is an example of

Question 27 options:

a commodities exchange.

an organized exchange.

all of these.

an over-the-counter market exchange.

Question 28(0.2 points)

The most fundamental way that a business can grow in size is the reinvestment of cash flows or earnings.

Question 28 options:

TrueFalse

Question 29(0.2 points)

The capital budgeting decision process addresses

Question 29 options:

how a firm should finance its assets.

how a firm's day-to-day financial matters should be managed.

which productive assets a firm should purchase.

all of these.

Question 30(0.2 points)

Capital budgeting decisions generally impact more on

Question 30 options:

the current liability portion of the balance sheet.

the short-term portion of the balance sheet.

all of these.

the asset portion of the balance sheet.

Question 31(0.2 points)

Which of the following theories states that security prices reflect all public information, but not all private information?

Question 31 options:

Nominal-form efficiency

Semistrong-form efficiency

Weak-form efficiency

Strong-form efficiency

Question 32(0.2 points)

Which of the following unconditional powers does the audit committee have the authority to do?

Question 32 options:

Audit the compensation files of firms in the same industry

Question any person employed by the firm

None of these

Audit the personal bank account of the CEO

Question 33(0.2 points)

Which of the following helps in maximizing stockholder's wealth not usually account for?

Question 33 options:

The timing of cash flows.

Amount of cash flows.

Government regulation.

Risk.

Question 34(0.2 points)

The dollar difference between a firm's total current assets and total liabilities is called its net working capital.

Question 34 options:

TrueFalse

Question 35(0.2 points)

One of the main services offered by investment banks to companies is

Question 35 options:

helping companies sell new debt or equity issues in the security markets.

making loans to companies.

all of these.

taking deposits from companies.

Question 36(0.2 points)

Which of the following is an appropriate goal for a firm?

Question 36 options:

Revenue maximization

Profit maximization

Stockholder's wealth maximization

Tax minimization

Question 37(0.2 points)

During an economic expansion, we would expect

Question 37 options:

interest rates to increase.

the cost of money to decrease.

interest rates to remain the same.

interest rates to decrease.

Question 38(0.2 points)

The ease with which a security can be sold and converted into cash is called

Question 38 options:

convertibility.

none of these.

liquidity.

marketability.

Question 39(0.2 points)

Who among the following is the principal in the agency relationship of a corporation?

Question 39 options:

The CEO of the firm

A company engineer

A stockholders

The board of directors

Question 40(0.2 points)

A sole proprietorship is an owner's only business.

Question 40 options:

TrueFalse

Question 41(0.2 points)

Which of the following is a process by which investment bankers purchase new securities directly from the issuing company and resell them to the investors?

Question 41 options:

Distribution

Private placement

Agency marketing

Underwriting

Question 42(0.2 points)

The term money market is used because

Question 42 options:

the instruments traded in this market are close substitutes for cash.

it is a market where stocks are converted into money.

firms that issue securities in this market are in dire need of cash.

none of these.

Question 43(0.2 points)

Who among the following is typically responsible for managing a large corporation's financial function?

Question 43 options:

The Chairman of the board

The CFO

The CEO

The Vice-President - Production

Question 44(0.2 points)

One reason for the existence of agency problems between managers and stockholders is that

Question 44 options:

none of these.

managers know how to manage the firm better than stockholders.

stockholders have unreasonable expectations about managerial performance.

there is a significant degree of separation between management and ownership.

Question 45(0.2 points)

If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?

Question 45 options:

5 percent

None of these

10 percent

25 percent

Question 46(0.2 points)

If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the

Question 46 options:

all of these.

money market.

futures market.

capital market.

Question 47(0.2 points)

The role of the financial system is to gather money from people, businesses and government that have funds to invest and to channel that money to those who need it.

Question 47 options:

TrueFalse

Question 48(0.2 points)

Saved

If a small business opts not to borrow funds from a commercial bank, then what will probably be its next best alternative?

Question 48 options:

An insurance company

A business finance company

A pension

An investment fund

Question 49(0.2 points)

If you are a borrower, which would you prefer to occur during the life of your loan?

Question 49 options:

A level of inflation that is higher than that anticipated at the outset of the loan

A level of inflation that is lower than that anticipated at the outset of the loan

A level of inflation that is exactly as anticipated at the outset of the loan

No inflation at all

Question 50(0.2 points)

A line of credit to a corporation is like _____ to an individual.

Question 50 options:

a debit card

a bond

a credit card

a term loan