TEST BANK For Finance: Applications and Theory 4th Edition
by Marcia Cornett , Troy Adair , John NofsingerISBN NO: 978-
1259691416 ALL CHAPTERS Included 1-20
, Chapter 01 Introduction to Financial Management Answer Key
Multiple Choice Questions
1. The increase in oil production in the United States characterizes which of the following key financial concepts presented in
this book?
A. the Rule of 72
B. time value of money
C. risk and return
D. capital budgeting
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-09 Explain the business ramifications of the decline in the price of oil and Chinas economic slowdown.
Topic: Historical performance
2. Which of the following is not an impact of the slowdown occurring in China’s economy?
A. lower demand in materials such as steel, iron ore, and copper
B. real estate market declining in Sydney, Australia
C. money going out of Manhattan, New York
D. falling community prices
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-09 Explain the business ramifications of the decline in the price of oil and Chinas economic slowdown.
Topic: Historical performance
3. Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of
capital returned to the investors?
A. retained earnings
B. taxes
C. dividends
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Dividends and payout policy
4. This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to
own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.
A. real markets
B. investments
C. financial management
AACSB: Reflective Thinking
1-1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained
earnings.
A. investments
B. financial management
C. treasury management
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
6. Financial management involves decisions about which of the following?
A. which projects to fund
B. how to minimize taxation
C. what type of capital should be raised
D. all of these choices are correct.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Financial management decisions
7. This subarea of finance helps facilitate the capital flows between investors and companies.
A. investments
B. financial management
C. treasury management
D. financial institutions and markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
8. This subarea of finance is important for adapting to the global economy.
A. investments
B. financial management
C. international finance
D. financial institutions and markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
9. A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the
expected magnitude of the loss. This is called
A. options.
B. standard deviation.
C. coefficient of variation.
D. risk.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Risks and returns
10. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.
A. investment
B. financial asset
C. real asset
D. financial markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
11. Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the
marketplace, and are subject to the same laws and regulations?
A. investments
B. asset classes
C. market instruments
D. financial markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
12. The most commonly accepted groups of asset classes include all of the following except
A. stocks.
B. bonds.
C. machinery and equipment.
D. real estate.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
by Marcia Cornett , Troy Adair , John NofsingerISBN NO: 978-
1259691416 ALL CHAPTERS Included 1-20
, Chapter 01 Introduction to Financial Management Answer Key
Multiple Choice Questions
1. The increase in oil production in the United States characterizes which of the following key financial concepts presented in
this book?
A. the Rule of 72
B. time value of money
C. risk and return
D. capital budgeting
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-09 Explain the business ramifications of the decline in the price of oil and Chinas economic slowdown.
Topic: Historical performance
2. Which of the following is not an impact of the slowdown occurring in China’s economy?
A. lower demand in materials such as steel, iron ore, and copper
B. real estate market declining in Sydney, Australia
C. money going out of Manhattan, New York
D. falling community prices
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-09 Explain the business ramifications of the decline in the price of oil and Chinas economic slowdown.
Topic: Historical performance
3. Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of
capital returned to the investors?
A. retained earnings
B. taxes
C. dividends
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Dividends and payout policy
4. This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to
own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.
A. real markets
B. investments
C. financial management
AACSB: Reflective Thinking
1-1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained
earnings.
A. investments
B. financial management
C. treasury management
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
6. Financial management involves decisions about which of the following?
A. which projects to fund
B. how to minimize taxation
C. what type of capital should be raised
D. all of these choices are correct.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Financial management decisions
7. This subarea of finance helps facilitate the capital flows between investors and companies.
A. investments
B. financial management
C. treasury management
D. financial institutions and markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
8. This subarea of finance is important for adapting to the global economy.
A. investments
B. financial management
C. international finance
D. financial institutions and markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
9. A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the
expected magnitude of the loss. This is called
A. options.
B. standard deviation.
C. coefficient of variation.
D. risk.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Risks and returns
10. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.
A. investment
B. financial asset
C. real asset
D. financial markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Blooms: Understand
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
11. Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the
marketplace, and are subject to the same laws and regulations?
A. investments
B. asset classes
C. market instruments
D. financial markets
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Basic
Learning Goal: 01-01 Define the major areas of finance as they apply to corporate financial management.
Topic: Introduction to corporate finance
12. The most commonly accepted groups of asset classes include all of the following except
A. stocks.
B. bonds.
C. machinery and equipment.
D. real estate.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
