gement Core Concepts, 5th edition Raymond Brooks Jimmy
kx kx kx kx kx kx kx
Yang Chapter 1-18
kx kx
Chapter 1 kx Financial Management kx
1.1 The Cycle of Money kx kx kx
1) At its most basic level, the function of financial intermediaries is to
kx kx kx . kx kx kx kx kx kx kx kx kx
A) track and report interest rateskx kx kx kx
B) move money from lenders to borrowers and back again
kx kx kx kx kx kx kx kx
C) report all financial transactions to the federal government
kx kx kx kx kx kx kx
D) effect a transfer of wealth in society
kx kx kx kx kx kx kx
Answer: B k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
2) Which of the following is NOT an example of a financial transaction?
kx kx kx kx kx kx kx kx kx kx kx
A) Your parents use their credit card to pay for your current term's college tuition.
kx kx kx kx kx bn kx kx kx kx kx kx kx
B) You use the ATM at Heathrow airport in London to withdraw British pounds.
kx kx kx kx kx kx kx kx kx kx kx kx
C) Your roommate lends you $20 and you repay it in one week.
kx kx kx kx kx kx kx kx kx kx kx
D) All of the above are financial transactions.
kx kx kx kx kx kx kx
Answer: D k x
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
3) The movement of money from lender to borrower and back again is known as
kx . kx kx kx kx kx kx kx kx kx kx kx kx kx
A) the circle of life kx kx kx
B) corporate finance kx
C) the cycle of money kx kx kx
D) moneylaundering kx kx
Answer: C k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
kx k x k x kx kx kx kx kx kx kx kx kx kx kx kx
1
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
,4) The common objective of borrowing and lending is to
kx . kx kx kx kx kx kx kx kx
A) make all parties better off kx kx kx kx
B) gain a profit at the other's expense
kx kx kx kx kx kx
C) make a firm or individual appear more liquid than is really the case
kx kx kx kx kx kx kx kx kx kx kx kx
D) thwart regulatory authority kx kx kx
Answer: A k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
5) Which of the following is NOT a function of a financial intermediary in the l
kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ending/borrowing process? kx
A) To help establish terms of the lending/borrowing agreement
kx kx kx kx kx kx kx
B) To match the borrower and the lender
kx kx kx kx kx kx
C) To bear the risk that the lender will not repay
kx kx kx bn bn kx kx kx kx
D) To bear the risk that the borrower will not repay
kx kx kx kx bn kx kx kx kx kx
Answer: C k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
6) Professor Gaston, your History teacher, borrows money at a rate of 6% per year from the V
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
alley State Bank for a tuition loan for her son. You have $1,200 deposited into your checking ac c
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ount at the same bank earning a rate of 0.5% per year. Which of the following statements is T
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
RUE?
A) The bank is criminally liable to you for paying an interest rate lower than the expected rate of i
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
nflation.
B) You and your professor have an obvious conflict of interest because you have accounts at the s
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ame financial institution.
kx kx
C) You benefit from earning interest on your deposit, safety for your funds, and having a
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
recognizable means for paying for your financial obligations without having to hold cash.
kx kx kx kx kx kx kx kx kx kx kx kx
D) Your professor is the only party to be made worse off by this example because she is the only
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
party paying net interest.
kx kx kx
Answer: C k x k x
Explanation: Both you and your professor are using services typically provided by banks. There i
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx
s no conflict of interest.
kx kx bn kx
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
2
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
,7) The basic function of financial intermediaries is to move advice from lenders to borrowers and b
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ack to lenders.
kx kx
Answer: FALSE k x
Explanation: The basic function of financial intermediaries is to move MONEY from lenders to borr owe
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx
rs and back to lenders.
kx kx kx kx
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
8) In the lending/borrowing process, a financial intermediary function is to bear the risk that the b
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
orrower will not repay. kx kx kx
Answer: TRUE Dif kx kx
f: 1
kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
9) All financial transactions have a buyer and a seller.
kx kx kx kx kx kx kx kx kx
Answer: TRUE k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
10) Give three examples of a financial transaction.
kx kx kx kx kx kx
Answer: (1) Your parents use their credit card to pay some of your college expenses.
k x kx kx kx kx kx kx kx kx kx kx kx kx kx
(2) You use the ATM to withdraw funds so you can buy your best friend a birthday gift.
kx kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx
(3) Your roommate lends you $20 and you repay it when you get your next pay check.
kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ng and lending.
kx bn
1.2 Overview of Finance Areas kx kx kx
1) Which of the following best identifies the four main areas of finance?
kx kx kx kx kx kx kx kx kx kx kx
A) Exchange rate management, investments, financial institutions and markets, international f
kx kx kx kx kx kx kx kx kx
inance
B) Corporate finance, investments, capital structure, international finance
kx kx kx kx kx kx
C) Corporate finance, investments, financial institutions and markets, international finance
kx kx kx kx kx kx kx kx
D) Corporate finance, capital budgeting, financial institutions and markets, regulation
kx kx kx kx kx kx kx kx kx
Answer: C k x
3
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
, Explanation: Exchange rate management, capital structure, and capital budgeting are activities w
k x kx kx kx kx kx kx kx kx kx kx kx
ithin the functional areas of finance.
kx kx kx kx kx
Diff: 2 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
kx kx
2) Of the following, which is NOT one of the four main areas of finance?
kx kx kx kx kx kx kx kx kx kx kx kx kx
A) International finance kx
B) Corporate finance kx
C) Investments
D) Working capital management kx kx kx
Answer: D k x
Explanation: WCM is a primary function of corporate finance. D
k x kx kx kx kx kx kx kx kx kx
iff: 1 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx bn kx kx kx kx kx kx
at each encompasses.
kx kx
3) The set of financial activities that support the OPERATIONS of a business is best described
kx bn kx kx kx bn kx kx kx kx kx kx kx kx kx
by which main area of finance?
kx bn bn kx kx
A) Corporate finance kx
B) Investments
C) Financial institutions and markets kx kx kx
D) International finance kx bk
xAnswer: A k x
Diff: 1 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
kx kx
4) is the area of finance concerned with activities such as borrowing funds to finance l
kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ong-term projects; For example, plant expansions or new product launches.
kx kx kx kx kx kx kx kx kx
A) Working capital management kx kx
B) International finance kx
C) Investments
D) Corporatefinance kx kx
Answer: D k x
Diff: 2 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
kx kx
4
Copyright © 2025 Pearson Education, Inc.kx kx kx bn kx
kx kx kx kx kx kx kx
Yang Chapter 1-18
kx kx
Chapter 1 kx Financial Management kx
1.1 The Cycle of Money kx kx kx
1) At its most basic level, the function of financial intermediaries is to
kx kx kx . kx kx kx kx kx kx kx kx kx
A) track and report interest rateskx kx kx kx
B) move money from lenders to borrowers and back again
kx kx kx kx kx kx kx kx
C) report all financial transactions to the federal government
kx kx kx kx kx kx kx
D) effect a transfer of wealth in society
kx kx kx kx kx kx kx
Answer: B k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
2) Which of the following is NOT an example of a financial transaction?
kx kx kx kx kx kx kx kx kx kx kx
A) Your parents use their credit card to pay for your current term's college tuition.
kx kx kx kx kx bn kx kx kx kx kx kx kx
B) You use the ATM at Heathrow airport in London to withdraw British pounds.
kx kx kx kx kx kx kx kx kx kx kx kx
C) Your roommate lends you $20 and you repay it in one week.
kx kx kx kx kx kx kx kx kx kx kx
D) All of the above are financial transactions.
kx kx kx kx kx kx kx
Answer: D k x
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
3) The movement of money from lender to borrower and back again is known as
kx . kx kx kx kx kx kx kx kx kx kx kx kx kx
A) the circle of life kx kx kx
B) corporate finance kx
C) the cycle of money kx kx kx
D) moneylaundering kx kx
Answer: C k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
kx k x k x kx kx kx kx kx kx kx kx kx kx kx kx
1
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
,4) The common objective of borrowing and lending is to
kx . kx kx kx kx kx kx kx kx
A) make all parties better off kx kx kx kx
B) gain a profit at the other's expense
kx kx kx kx kx kx
C) make a firm or individual appear more liquid than is really the case
kx kx kx kx kx kx kx kx kx kx kx kx
D) thwart regulatory authority kx kx kx
Answer: A k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
5) Which of the following is NOT a function of a financial intermediary in the l
kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ending/borrowing process? kx
A) To help establish terms of the lending/borrowing agreement
kx kx kx kx kx kx kx
B) To match the borrower and the lender
kx kx kx kx kx kx
C) To bear the risk that the lender will not repay
kx kx kx bn bn kx kx kx kx
D) To bear the risk that the borrower will not repay
kx kx kx kx bn kx kx kx kx kx
Answer: C k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
6) Professor Gaston, your History teacher, borrows money at a rate of 6% per year from the V
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
alley State Bank for a tuition loan for her son. You have $1,200 deposited into your checking ac c
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ount at the same bank earning a rate of 0.5% per year. Which of the following statements is T
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
RUE?
A) The bank is criminally liable to you for paying an interest rate lower than the expected rate of i
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
nflation.
B) You and your professor have an obvious conflict of interest because you have accounts at the s
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ame financial institution.
kx kx
C) You benefit from earning interest on your deposit, safety for your funds, and having a
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
recognizable means for paying for your financial obligations without having to hold cash.
kx kx kx kx kx kx kx kx kx kx kx kx
D) Your professor is the only party to be made worse off by this example because she is the only
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
party paying net interest.
kx kx kx
Answer: C k x k x
Explanation: Both you and your professor are using services typically provided by banks. There i
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx
s no conflict of interest.
kx kx bn kx
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
2
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
,7) The basic function of financial intermediaries is to move advice from lenders to borrowers and b
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ack to lenders.
kx kx
Answer: FALSE k x
Explanation: The basic function of financial intermediaries is to move MONEY from lenders to borr owe
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx
rs and back to lenders.
kx kx kx kx
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
8) In the lending/borrowing process, a financial intermediary function is to bear the risk that the b
kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
orrower will not repay. kx kx kx
Answer: TRUE Dif kx kx
f: 1
kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
9) All financial transactions have a buyer and a seller.
kx kx kx kx kx kx kx kx kx
Answer: TRUE k x
Diff: 1 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx kx
ng and lending.
kx bn
10) Give three examples of a financial transaction.
kx kx kx kx kx kx
Answer: (1) Your parents use their credit card to pay some of your college expenses.
k x kx kx kx kx kx kx kx kx kx kx kx kx kx
(2) You use the ATM to withdraw funds so you can buy your best friend a birthday gift.
kx kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx
(3) Your roommate lends you $20 and you repay it when you get your next pay check.
kx kx kx kx kx kx kx kx kx kx kx bn kx kx kx kx
Diff: 2 kx
Topic: 1.1 The Cycle of Money AACS
k x kx kx kx kx kx kx
B: Analytical Thinking
k x kx
LO: 1.1 Describe the cycle of money, the participants in the cycle, and the common objective of borr owi
k x kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx kx
ng and lending.
kx bn
1.2 Overview of Finance Areas kx kx kx
1) Which of the following best identifies the four main areas of finance?
kx kx kx kx kx kx kx kx kx kx kx
A) Exchange rate management, investments, financial institutions and markets, international f
kx kx kx kx kx kx kx kx kx
inance
B) Corporate finance, investments, capital structure, international finance
kx kx kx kx kx kx
C) Corporate finance, investments, financial institutions and markets, international finance
kx kx kx kx kx kx kx kx
D) Corporate finance, capital budgeting, financial institutions and markets, regulation
kx kx kx kx kx kx kx kx kx
Answer: C k x
3
Copyright © 2025 Pearson Education, Inc. kx kx kx bn kx
, Explanation: Exchange rate management, capital structure, and capital budgeting are activities w
k x kx kx kx kx kx kx kx kx kx kx kx
ithin the functional areas of finance.
kx kx kx kx kx
Diff: 2 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
kx kx
2) Of the following, which is NOT one of the four main areas of finance?
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A) International finance kx
B) Corporate finance kx
C) Investments
D) Working capital management kx kx kx
Answer: D k x
Explanation: WCM is a primary function of corporate finance. D
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iff: 1 kx
Topic: 1.2 Overview of Finance Areas
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AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
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at each encompasses.
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3) The set of financial activities that support the OPERATIONS of a business is best described
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by which main area of finance?
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A) Corporate finance kx
B) Investments
C) Financial institutions and markets kx kx kx
D) International finance kx bk
xAnswer: A k x
Diff: 1 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
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4) is the area of finance concerned with activities such as borrowing funds to finance l
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ong-term projects; For example, plant expansions or new product launches.
kx kx kx kx kx kx kx kx kx
A) Working capital management kx kx
B) International finance kx
C) Investments
D) Corporatefinance kx kx
Answer: D k x
Diff: 2 kx
Topic: 1.2 Overview of Finance Areas
k x kx kx kx kx kx
AACSB: Analytical Thinking k x kx
LO: 1.2 Distinguish the four main areas of finance and briefly explain the financial activities th
k x kx bn kx kx kx kx kx kx kx kx kx kx kx kx kx
at each encompasses.
kx kx
4
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