ch1
Student: ___________________________________________________________________________
1. A business created as a distinct legal entity composed of one or more individuals or entities is known as
a:
A. sole proprietorship
B. partnership
C. joint venture
D. company
2. The primary goal of financial management is to:
A. maximise current sales
B. maximise the value of shares
C. minimise costs
D. avoid bankruptcy
E. all of the given answers
3. The ________ is a snapshot of the firm:
A. asset statement
B. liabilities statement
C. cash flow statement
D. balance sheet
E. either cash flow statement or balance sheet
4. For a brief period the balance sheet was known as ________.
A. statement of cash flows
B. statement of operating profits
C. statement of working capital
D. statement of financial position
5. The difference between the total value of assets and the total value of liabilities is the ________.
A. net cash flows
B. net working capital
C. shareholders' equity
D. operating profit
6. A debt that is not due in the coming year is classified as a(n) ________.
A. indirect liability
B. direct liability
C. non-current liability
D. current liability
E. long-term liability
1
,7. Under sole proprietorship, the owner has ________ for business debts.
A. limited liability
B. unlimited liability
C. no liability
D. limited personal liability
E. liability to the extent of 50% of the profits
8. Under partnership, the partners have ________ liability for partnership debts.
A. limited liability
B. unlimited liability
C. no liability
D. limited personal liability
E. liability to the extent of 50% of the profits
9. A business created as a distinct legal entity composed of one or more individuals or entities is known as
a(n):
A. partnership
B. company
C. sole proprietorship
D. limited liability business
E. open structure
10. Forming a company involves preparing a(n):
A. deed
B. agreement
C. constitution
D. ownership agreement
E. prospectus
11. A firm's ________ refers to the specific mixture of debt and equity the firm uses to finance its
operations.
A. operating structure
B. capital structure
C. financial structure
D. either capital structure or financial structure
E. working capital
12. Assets are classified as ________.
A. tangible or intangible
B. current or non-current
C. cash or accounts receivable
D. direct or indirect
13. A more general way of stating the goal of financial management is it aims to:
A. maximise the value of owners' equity
B. maximise the book value of owners' equity
C. maximise the market value of owners' equity
D. decrease the market value of owners' equity
E. both maximise the value of owners' equity and maximise the market value of owners' equity
2
,14. Which of the following forms of business organisation offers its owners unlimited liability?
1. partnership
2. sole proprietorship
3. company
4. both partnership and sole proprietorship
5. all of the given answers
15. The term Primary market refers to the:
A. original sale of securities by governments
B. original sale of securities by companies
C. securities bought and sold after the original sale
D. both original sale of securities by governments and original sale of securities by companies
E. both original sale of securities by companies and securities bought and sold after the original sale
16. A model that analyses the three important decisions in corporate finance is:
A. one period perfect certainty model
B. two period perfect certainty model
C. two period perfect uncertainty model
D. both one period perfect certainty model and two period perfect certainty model
E. none of the given answers
17. ________ states that in a perfect capital market, it is possible to separate the firm's investment decisions
from the owners' consumption decisions.
A. Arrow's impossibility theorem
B. Fisher's separation theorem
C. Two period perfect certainty model
D. The utility curves of investors
E. none of the given answers
18. Under the assumption of perfect certainty:
A. a firm's future cash flows are known exactly
B. a firm's past cash flows are known exactly
C. the market rate of interest is same for all participants
D. both a firm's future cash flows are known exactly and the market rate of interest is same for all
participants
E. all of the given answers
19.
A. all investors are wealth maximisers
B. all investors are utility minimisers
C. all investors are utility maximisers
D. all investors are utility or wealth maximisers
E. all of the given answers
20. SEATS is:
A. Stock Exchange Automated Transaction System
B. Stock Exchange Automatic Transaction System
C. Stock Exchange Automated Trading System
D. Stock Exchange Automated Terminal System
E. both Stock Exchange Automated Transaction System and Stock Exchange Automated Trading
System
3
, 21. SEATS was introduced in:
A. October 1978
B. October 1987
C. October 1990
D. October 1988
E. yet to be introduced
22. ________ are firms that specialise in marketing securities
A. investment banks
B. retail banks
C. merchant banks
D. underwriters
23. Capital structure is:
A. the mix of debt and equity maintained by a firm
B. the mix of debt and equity used by a firm to finance its operations
C. the mix of long-term debt and assets held by a firm
D. both the mix of debt and equity maintained by a firm and the mix of debt and equity used by a firm to
finance its operations
E. all of the given answers
24. The process of planning and managing a firm's investment in non-current assets is known as:
A. working capital management
B. financing decision
C. capital budgeting
D. earnings decision
E. none of the given answers
25. Evaluation of size, timing and risk of future cash flows is the essence of:
A. working capital management
B. profit maximisation
C. capital budgeting
D. both profit maximisation and capital budgeting
E. none of the given answers
26. The difference between a firm's current assets and current liabilities is called:
A. accounting profits
B. excess profits
C. net working capital
D. both accounting profits and net working capital
E. all of the given answers
27. The money market is a(n) ________.
A. short-term market
B. auction market
C. dealer market
D. long-term market
4
Student: ___________________________________________________________________________
1. A business created as a distinct legal entity composed of one or more individuals or entities is known as
a:
A. sole proprietorship
B. partnership
C. joint venture
D. company
2. The primary goal of financial management is to:
A. maximise current sales
B. maximise the value of shares
C. minimise costs
D. avoid bankruptcy
E. all of the given answers
3. The ________ is a snapshot of the firm:
A. asset statement
B. liabilities statement
C. cash flow statement
D. balance sheet
E. either cash flow statement or balance sheet
4. For a brief period the balance sheet was known as ________.
A. statement of cash flows
B. statement of operating profits
C. statement of working capital
D. statement of financial position
5. The difference between the total value of assets and the total value of liabilities is the ________.
A. net cash flows
B. net working capital
C. shareholders' equity
D. operating profit
6. A debt that is not due in the coming year is classified as a(n) ________.
A. indirect liability
B. direct liability
C. non-current liability
D. current liability
E. long-term liability
1
,7. Under sole proprietorship, the owner has ________ for business debts.
A. limited liability
B. unlimited liability
C. no liability
D. limited personal liability
E. liability to the extent of 50% of the profits
8. Under partnership, the partners have ________ liability for partnership debts.
A. limited liability
B. unlimited liability
C. no liability
D. limited personal liability
E. liability to the extent of 50% of the profits
9. A business created as a distinct legal entity composed of one or more individuals or entities is known as
a(n):
A. partnership
B. company
C. sole proprietorship
D. limited liability business
E. open structure
10. Forming a company involves preparing a(n):
A. deed
B. agreement
C. constitution
D. ownership agreement
E. prospectus
11. A firm's ________ refers to the specific mixture of debt and equity the firm uses to finance its
operations.
A. operating structure
B. capital structure
C. financial structure
D. either capital structure or financial structure
E. working capital
12. Assets are classified as ________.
A. tangible or intangible
B. current or non-current
C. cash or accounts receivable
D. direct or indirect
13. A more general way of stating the goal of financial management is it aims to:
A. maximise the value of owners' equity
B. maximise the book value of owners' equity
C. maximise the market value of owners' equity
D. decrease the market value of owners' equity
E. both maximise the value of owners' equity and maximise the market value of owners' equity
2
,14. Which of the following forms of business organisation offers its owners unlimited liability?
1. partnership
2. sole proprietorship
3. company
4. both partnership and sole proprietorship
5. all of the given answers
15. The term Primary market refers to the:
A. original sale of securities by governments
B. original sale of securities by companies
C. securities bought and sold after the original sale
D. both original sale of securities by governments and original sale of securities by companies
E. both original sale of securities by companies and securities bought and sold after the original sale
16. A model that analyses the three important decisions in corporate finance is:
A. one period perfect certainty model
B. two period perfect certainty model
C. two period perfect uncertainty model
D. both one period perfect certainty model and two period perfect certainty model
E. none of the given answers
17. ________ states that in a perfect capital market, it is possible to separate the firm's investment decisions
from the owners' consumption decisions.
A. Arrow's impossibility theorem
B. Fisher's separation theorem
C. Two period perfect certainty model
D. The utility curves of investors
E. none of the given answers
18. Under the assumption of perfect certainty:
A. a firm's future cash flows are known exactly
B. a firm's past cash flows are known exactly
C. the market rate of interest is same for all participants
D. both a firm's future cash flows are known exactly and the market rate of interest is same for all
participants
E. all of the given answers
19.
A. all investors are wealth maximisers
B. all investors are utility minimisers
C. all investors are utility maximisers
D. all investors are utility or wealth maximisers
E. all of the given answers
20. SEATS is:
A. Stock Exchange Automated Transaction System
B. Stock Exchange Automatic Transaction System
C. Stock Exchange Automated Trading System
D. Stock Exchange Automated Terminal System
E. both Stock Exchange Automated Transaction System and Stock Exchange Automated Trading
System
3
, 21. SEATS was introduced in:
A. October 1978
B. October 1987
C. October 1990
D. October 1988
E. yet to be introduced
22. ________ are firms that specialise in marketing securities
A. investment banks
B. retail banks
C. merchant banks
D. underwriters
23. Capital structure is:
A. the mix of debt and equity maintained by a firm
B. the mix of debt and equity used by a firm to finance its operations
C. the mix of long-term debt and assets held by a firm
D. both the mix of debt and equity maintained by a firm and the mix of debt and equity used by a firm to
finance its operations
E. all of the given answers
24. The process of planning and managing a firm's investment in non-current assets is known as:
A. working capital management
B. financing decision
C. capital budgeting
D. earnings decision
E. none of the given answers
25. Evaluation of size, timing and risk of future cash flows is the essence of:
A. working capital management
B. profit maximisation
C. capital budgeting
D. both profit maximisation and capital budgeting
E. none of the given answers
26. The difference between a firm's current assets and current liabilities is called:
A. accounting profits
B. excess profits
C. net working capital
D. both accounting profits and net working capital
E. all of the given answers
27. The money market is a(n) ________.
A. short-term market
B. auction market
C. dealer market
D. long-term market
4
