TEST BANK
INTRODUCTION TO CORPORATE FINANCE
5TH CANADIAN EDITION
CHAPTER NO. 01: AN INTRODUCTION TO FINANCE
MULTIPLE CHOICE QUESTIONS & ANSWERS
1. Finance is the study of how and under what terms
a) savings are allocated between lenders and borrowers.
b) investments are allocated between investors and brokers.
c) institutions with excess money make share purchase decisions.
d) households allocate money between spending and saving.
Answer: a
Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
2. A financial security is
a) a jail term for a financial manager that has committed fraud.
b) a contract that is created only when a new stock is issued to the public.
c) a financial contract created whenever funds are transferred.
d) a contract that is created only when a new bond is first sold.
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
3. Which of the following does NOT appear as an item on Canada’s balance sheet, as presented in the text?
a) non-residential structures
b) net worth or equity
c) net foreign liabilities
,d) net foreign assets
Answer: c
Type: Definition
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
4. Human capital is
a) based on only the current skills, but not the education, of a country’s citizens.
b) based on only the education, but not the current skills, of a country’s citizens.
c) based on the skills and education of citizens and should be included in a country’s wealth.
d) difficult to measure and should therefore not be included in a country’s wealth.
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
5. Which of the following items is NOT a real asset?
a) land
b) television
c) bond
d) gold mine
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
6. In the following list, which item is a financial asset?
a) land
b) bond
c) building
,d) inventory
Answer: b
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
7. What is the main difference between real assets and financial assets?
a) Real assets are tangible and financial assets are intangible.
b) Real assets have known values, while the values of financial assets are not known.
c) Real assets are intangible and financial assets are tangible.
d) Real assets have unknown values, while the values of financial assets are known.
Answer: a
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
8. If Canadian households, in aggregate, own real assets with a market value of $3.194 trillion, and also
own net financial assets with a market value of $2.344 trillion, the total net assets of Canadian households
have a market value of
a) $3.194 trillion
b) $5.538 trillion
c) $–0.850 trillion
d) $0.850 trillion
Answer: b
Type: Calculation
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $5.538 = $3.194 + $2.344
Blooms: Application
AACSB: Analytic
CPA: Finance
9. Given the following hypothetical information regarding the real and financial assets in Canada for 2022
, (numbers in $ billions):
Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344
What is the value of the total net assets in Canada for 2022?
a) $5,842 billion
b) $6,086 billion
c) $6,124 billion
d) $6,105 billion
Answer: c
Type: Calculation
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $6,124 = $677 + $2,202 + $3,194 – $658 – $1,635 + $2,344
Blooms: Application
AACSB: Analytic
CPA: Finance
10. You are provided with the following hypothetical information regarding the real and financial assets
in Canada for 2022 (numbers in $ billions):
Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344
What is the value of the net financial assets owned by non-residents for 2022?
a) $901 billion
b) $51 billion
c) $2,293 billion
d) There is not enough information to answer the question.
Answer: b
Type: Calculation
Difficulty: Difficult
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $51 billion = $2,344 – $658 – $1,635. The value of net financial assets held by non-residents is
equal to the negative of the sum of the net financial assets of government, businesses, and households.
Blooms: Application
INTRODUCTION TO CORPORATE FINANCE
5TH CANADIAN EDITION
CHAPTER NO. 01: AN INTRODUCTION TO FINANCE
MULTIPLE CHOICE QUESTIONS & ANSWERS
1. Finance is the study of how and under what terms
a) savings are allocated between lenders and borrowers.
b) investments are allocated between investors and brokers.
c) institutions with excess money make share purchase decisions.
d) households allocate money between spending and saving.
Answer: a
Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
2. A financial security is
a) a jail term for a financial manager that has committed fraud.
b) a contract that is created only when a new stock is issued to the public.
c) a financial contract created whenever funds are transferred.
d) a contract that is created only when a new bond is first sold.
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
3. Which of the following does NOT appear as an item on Canada’s balance sheet, as presented in the text?
a) non-residential structures
b) net worth or equity
c) net foreign liabilities
,d) net foreign assets
Answer: c
Type: Definition
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
4. Human capital is
a) based on only the current skills, but not the education, of a country’s citizens.
b) based on only the education, but not the current skills, of a country’s citizens.
c) based on the skills and education of citizens and should be included in a country’s wealth.
d) difficult to measure and should therefore not be included in a country’s wealth.
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
5. Which of the following items is NOT a real asset?
a) land
b) television
c) bond
d) gold mine
Answer: c
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
6. In the following list, which item is a financial asset?
a) land
b) bond
c) building
,d) inventory
Answer: b
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
7. What is the main difference between real assets and financial assets?
a) Real assets are tangible and financial assets are intangible.
b) Real assets have known values, while the values of financial assets are not known.
c) Real assets are intangible and financial assets are tangible.
d) Real assets have unknown values, while the values of financial assets are known.
Answer: a
Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Blooms: Knowledge
AACSB: Analytic
CPA: Finance
8. If Canadian households, in aggregate, own real assets with a market value of $3.194 trillion, and also
own net financial assets with a market value of $2.344 trillion, the total net assets of Canadian households
have a market value of
a) $3.194 trillion
b) $5.538 trillion
c) $–0.850 trillion
d) $0.850 trillion
Answer: b
Type: Calculation
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $5.538 = $3.194 + $2.344
Blooms: Application
AACSB: Analytic
CPA: Finance
9. Given the following hypothetical information regarding the real and financial assets in Canada for 2022
, (numbers in $ billions):
Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344
What is the value of the total net assets in Canada for 2022?
a) $5,842 billion
b) $6,086 billion
c) $6,124 billion
d) $6,105 billion
Answer: c
Type: Calculation
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $6,124 = $677 + $2,202 + $3,194 – $658 – $1,635 + $2,344
Blooms: Application
AACSB: Analytic
CPA: Finance
10. You are provided with the following hypothetical information regarding the real and financial assets
in Canada for 2022 (numbers in $ billions):
Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344
What is the value of the net financial assets owned by non-residents for 2022?
a) $901 billion
b) $51 billion
c) $2,293 billion
d) There is not enough information to answer the question.
Answer: b
Type: Calculation
Difficulty: Difficult
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $51 billion = $2,344 – $658 – $1,635. The value of net financial assets held by non-residents is
equal to the negative of the sum of the net financial assets of government, businesses, and households.
Blooms: Application
