TEST BANK FOR
CFIN 7th Edition Newer Edition Scott Besley; Eugene Brigham
Chapter 1-16
Table Of Contents:
Chapter 1: An Overview of Managerial Finance
Chapter 2: Analysis of Financial Statements
Chapter 3: The Financial Environment: Markets, Institutions, and
Investment Banking
Chapter 4: Time Value of Money
Chapter 5: The Cost of Money (Interest Rates)
Chapter 6: Bonds (Debt)—Characteristics and Valuation
Chapter 7: Stocks (Equity)—Characteristics and Valuation
Chapter 8: Risk and Rates of Return
Chapter 9: Capital Budgeting Techniques
Chapter 10: Project Cash Flows and Risk
Chapter 11: The Cost of Capital
Chapter 12: Capital Structure
Chapter 13: Distribution of Retained Earnings: Dividends and Stock Repurchases
Chapter 14: Managing Short-Term Financing (Liabilities)
Chapter 15: Managing Short-Term Assets
Chapter 16: Financial Planning and Control
Appendix A: Using Spreadsheets to Solve Financial Problems
Appendix B: Solutions to Practice Problems
,Name: Class: Date:
01: An Overview of Managerial Finance
1. Which of the following statements is correct? Assume everything else equal.
a. Riskier assets always have higher market values.
b. Riskier assets are more valuable than (preferred to) less risky assets.
c. The sooner cash is received, the more valuable it is.
d. Investors generally prefer short-term, high-risk assets investments.
e. Investors generally receive higher returns on investments with low risk than investments with high risk.
ANSWER: c
2. The success of financial institutions depends on _____.
a. the understanding of the factors that cause interest rates and other returns in the financial markets to rise and
fall
b. the environmentally responsible behavior of the shareholders of corporations
c. the expectations of long-term investors in the company
d. the awareness of the shareholders regarding the regulations that affect public corporations
e. the prior knowledge of the decisions that public corporations make concerning their cash flows
ANSWER: a
3. Which of the following is true of the investment function of finance?
a. The investment function focuses on socially responsible actions taken by corporations.
b. The investment function focuses on the values, risks, and returns associated with financial assets such as
stocks and bonds.
c. The investment function focuses on the optimal mix of securities based on the environment-friendly behavior
of the corporations.
d. The investment function focuses on regulations applicable to a public corporation.
e. The investment function focuses on additional information about the procedures used to construct and report
financial statements.
ANSWER: b
4. Identify a true statement about the financial services provided by organizations.
a. Financial services organizations invest only in environmentally responsible public corporations.
b. Financial services include services provided by banks and insurance companies only.
c. Financial services organizations make investment decisions based solely on the socially responsible behavior
of corporates.
d. Financial services organizations provide comparative cash flow positions of competing corporations to
investors to help them with investment decisions.
e. Financial services organizations help individuals and companies determine how to invest money to achieve
their financial goals.
ANSWER: e
5. Financial services refer to functions provided by organizations that _____.
a. deal with the most efficient management of the human resources
b. ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations
c. recommend the most environment friendly method of operations to a corporation
d. recommend the types of securities to be issued to finance plant expansions
e. deal with the management of money
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,Name: Class: Date:
01: An Overview of Managerial Finance
ANSWER: e
6. Which of the following functions deals with the management of money?
a. Marketing
b. Human resources
c. Financial services
d. Information systems
e. Research and development
ANSWER: c
7. Which of the following is true of financial services provided by persons working in banks, insurance companies, and
brokerage firms?
a. Persons working in banks, insurance companies, and brokerage firms help corporations to decide the types of
securities to be issued to finance plant expansion.
b. Persons working in banks, insurance companies, and brokerage firms help individuals and companies
determine how to invest money to achieve their financial goals.
c. Persons working in banks, insurance companies, and brokerage firms help corporations fulfill the regulations
required by the Sarbanes-Oxley Act.
d. Persons working in banks, insurance companies, and brokerage firms help public corporations follow
environment-friendly practices.
e. Persons working in banks, insurance companies, and brokerage firms help corporations in framing their
bylaws.
ANSWER: b
8. Which of the following is true of financial institutions?
a. Financial institutions are the regulators of interest rates and other returns in financial markets.
b. Managers of financial institutions should have an understanding of factors that cause interest rates and other
returns in the financial markets to rise and fall.
c. Financial institutions are accountable and responsible in reporting financial information for publicly-traded
corporations.
d. Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures
taken by investment corporations.
e. Financial institutions require public corporations to adopt socially responsible work practices.
ANSWER: b
9. The investment function of finance helps in _____.
a. making decisions regarding the dividends paid by a corporation
b. determining the expenses to be incurred to ensure that the behavior of an investment corporation is socially
acceptable
c. determining the values, risks, and returns associated with such financial assets as stocks and bonds
d. ensuring that 50 percent of all investments in a portfolio are in environment-friendly corporations
e. ensuring that the corporations payout maximum dividends per share
ANSWER: c
10. The success of financial institutions requires an understanding of _____.
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, Name: Class: Date:
01: An Overview of Managerial Finance
a. regulations regarding the maximization of wealth applicable to the corporations
b. regulations that affect these financial institutions
c. the environment-friendly manufacturing methods adopted by various corporations
d. the socially responsible behavior required to be demonstrated by these institutions
e. their accountability in reporting the financial information for a publicly-traded company
ANSWER: b
11. The treasurer of a company is a key subordinate of the _____.
a. controller
b. financial vice president
c. chief executive officer
d. credit manager
e. director of capital budgeting
ANSWER: b
12. The credit manager is supervised by the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: a
13. The accounting and tax departments are the responsibility of the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: e
14. Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference
between proprietorship and partnership business forms is that _____.
a. a partnership has more owners than a proprietorship
b. the combined personal liability associated with a partnership is significantly less than the combined personal
liability associated with a proprietorship
c. a partnership is generally easier to form than a proprietorship
d. the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always
potentially unlimited
e. many more businesses are formed as partnerships than proprietorships
ANSWER: a
15. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?
a. An S corporation can have more than one type of stock outstanding, whereas an LLC can have only one type
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CFIN 7th Edition Newer Edition Scott Besley; Eugene Brigham
Chapter 1-16
Table Of Contents:
Chapter 1: An Overview of Managerial Finance
Chapter 2: Analysis of Financial Statements
Chapter 3: The Financial Environment: Markets, Institutions, and
Investment Banking
Chapter 4: Time Value of Money
Chapter 5: The Cost of Money (Interest Rates)
Chapter 6: Bonds (Debt)—Characteristics and Valuation
Chapter 7: Stocks (Equity)—Characteristics and Valuation
Chapter 8: Risk and Rates of Return
Chapter 9: Capital Budgeting Techniques
Chapter 10: Project Cash Flows and Risk
Chapter 11: The Cost of Capital
Chapter 12: Capital Structure
Chapter 13: Distribution of Retained Earnings: Dividends and Stock Repurchases
Chapter 14: Managing Short-Term Financing (Liabilities)
Chapter 15: Managing Short-Term Assets
Chapter 16: Financial Planning and Control
Appendix A: Using Spreadsheets to Solve Financial Problems
Appendix B: Solutions to Practice Problems
,Name: Class: Date:
01: An Overview of Managerial Finance
1. Which of the following statements is correct? Assume everything else equal.
a. Riskier assets always have higher market values.
b. Riskier assets are more valuable than (preferred to) less risky assets.
c. The sooner cash is received, the more valuable it is.
d. Investors generally prefer short-term, high-risk assets investments.
e. Investors generally receive higher returns on investments with low risk than investments with high risk.
ANSWER: c
2. The success of financial institutions depends on _____.
a. the understanding of the factors that cause interest rates and other returns in the financial markets to rise and
fall
b. the environmentally responsible behavior of the shareholders of corporations
c. the expectations of long-term investors in the company
d. the awareness of the shareholders regarding the regulations that affect public corporations
e. the prior knowledge of the decisions that public corporations make concerning their cash flows
ANSWER: a
3. Which of the following is true of the investment function of finance?
a. The investment function focuses on socially responsible actions taken by corporations.
b. The investment function focuses on the values, risks, and returns associated with financial assets such as
stocks and bonds.
c. The investment function focuses on the optimal mix of securities based on the environment-friendly behavior
of the corporations.
d. The investment function focuses on regulations applicable to a public corporation.
e. The investment function focuses on additional information about the procedures used to construct and report
financial statements.
ANSWER: b
4. Identify a true statement about the financial services provided by organizations.
a. Financial services organizations invest only in environmentally responsible public corporations.
b. Financial services include services provided by banks and insurance companies only.
c. Financial services organizations make investment decisions based solely on the socially responsible behavior
of corporates.
d. Financial services organizations provide comparative cash flow positions of competing corporations to
investors to help them with investment decisions.
e. Financial services organizations help individuals and companies determine how to invest money to achieve
their financial goals.
ANSWER: e
5. Financial services refer to functions provided by organizations that _____.
a. deal with the most efficient management of the human resources
b. ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations
c. recommend the most environment friendly method of operations to a corporation
d. recommend the types of securities to be issued to finance plant expansions
e. deal with the management of money
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
01: An Overview of Managerial Finance
ANSWER: e
6. Which of the following functions deals with the management of money?
a. Marketing
b. Human resources
c. Financial services
d. Information systems
e. Research and development
ANSWER: c
7. Which of the following is true of financial services provided by persons working in banks, insurance companies, and
brokerage firms?
a. Persons working in banks, insurance companies, and brokerage firms help corporations to decide the types of
securities to be issued to finance plant expansion.
b. Persons working in banks, insurance companies, and brokerage firms help individuals and companies
determine how to invest money to achieve their financial goals.
c. Persons working in banks, insurance companies, and brokerage firms help corporations fulfill the regulations
required by the Sarbanes-Oxley Act.
d. Persons working in banks, insurance companies, and brokerage firms help public corporations follow
environment-friendly practices.
e. Persons working in banks, insurance companies, and brokerage firms help corporations in framing their
bylaws.
ANSWER: b
8. Which of the following is true of financial institutions?
a. Financial institutions are the regulators of interest rates and other returns in financial markets.
b. Managers of financial institutions should have an understanding of factors that cause interest rates and other
returns in the financial markets to rise and fall.
c. Financial institutions are accountable and responsible in reporting financial information for publicly-traded
corporations.
d. Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures
taken by investment corporations.
e. Financial institutions require public corporations to adopt socially responsible work practices.
ANSWER: b
9. The investment function of finance helps in _____.
a. making decisions regarding the dividends paid by a corporation
b. determining the expenses to be incurred to ensure that the behavior of an investment corporation is socially
acceptable
c. determining the values, risks, and returns associated with such financial assets as stocks and bonds
d. ensuring that 50 percent of all investments in a portfolio are in environment-friendly corporations
e. ensuring that the corporations payout maximum dividends per share
ANSWER: c
10. The success of financial institutions requires an understanding of _____.
Copyright Cengage Learning. Powered by Cognero. Page 2
, Name: Class: Date:
01: An Overview of Managerial Finance
a. regulations regarding the maximization of wealth applicable to the corporations
b. regulations that affect these financial institutions
c. the environment-friendly manufacturing methods adopted by various corporations
d. the socially responsible behavior required to be demonstrated by these institutions
e. their accountability in reporting the financial information for a publicly-traded company
ANSWER: b
11. The treasurer of a company is a key subordinate of the _____.
a. controller
b. financial vice president
c. chief executive officer
d. credit manager
e. director of capital budgeting
ANSWER: b
12. The credit manager is supervised by the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: a
13. The accounting and tax departments are the responsibility of the _____.
a. treasurer
b. inventory manager
c. director of capital budgeting
d. vice president of finance
e. controller
ANSWER: e
14. Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference
between proprietorship and partnership business forms is that _____.
a. a partnership has more owners than a proprietorship
b. the combined personal liability associated with a partnership is significantly less than the combined personal
liability associated with a proprietorship
c. a partnership is generally easier to form than a proprietorship
d. the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always
potentially unlimited
e. many more businesses are formed as partnerships than proprietorships
ANSWER: a
15. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?
a. An S corporation can have more than one type of stock outstanding, whereas an LLC can have only one type
Copyright Cengage Learning. Powered by Cognero. Page 3
