, (Finance for Non-Financial Managers, 7th Canadian Edition Pierre Bergeron)
(Test Bank all Chapters)
Chapter 1 Overview of Financial Management
MULTIPLE CHOICE
1. Which of the following statements describes an activity which is financial management?
a. Looking after trade payables and corporate accounting is not a responsibility of the
controller.
b. Monitoring the profit for the year which is the difference between revenue and
gross profit.
c. The treasurer raising funds.
d. Ensuring that the cost of borrowing is greater than the return on assets.
ANS: C PTS: 1 REF: 11 OBJ: LO 2
BLM: Higher Order
2. Which of the following statements describes a financial management activity?
a. Arranging internal financing is obtained from banks and investors.
b. Ensuring liquidity by managing the payment of dividends.
c. Operating decisions dealing with better utilization of non-current assets.
d. The stability objective is related to the financial structure of a business.
ANS: D PTS: 1 REF: 15 OBJ: LO 4
BLM: Remember
3. Which of the following activities is NOT a financial management function?
a. The treasurer is responsible for corporate accounting.
b. External financing is obtained from investors.
c. Internal financing is obtained from retained earnings and
depreciation/amortization.
d. Improving net profit through the use of productivity indicators and planned
downsizing.
ANS: A PTS: 1 REF: 11 OBJ: LO 3
BLM: Remember
4. What is the ultimate objective of financial management?
a. to ensure the ROA is higher than ROR
b. to obtain a higher ROR than ROA
c. to ensure that ROA is higher than the cost of financing
d. to collect trade receivables faster than the payment of trade and other payables
ANS: C PTS: 1 REF: 7 OBJ: LO 2
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-1
, Chapter 1 Overview of Financial Management
5. Which activity is the controller responsible for?
a. general accounting
b. tax administration
c. investor relations
d. analyzing short- and long-term borrowing sources
ANS: A PTS: 1 REF: 11 OBJ: LO 3
BLM: Remember
6. What is considered an "efficiency" financial objective?
a. the ability to meet short-term financial commitments
b. the ability minimize the cost of borrowed funds
c. the return on trade receivables
d. the return on revenue
ANS: D PTS: 1 REF: 13 OBJ: LO 4
BLM: Remember
7. What does the profit for the year pay for?
a. executive bonuses
b. interest on debt
c. dividends
d. employee salaries
ANS: C PTS: 1 REF: 17 OBJ: LO 5
BLM: Remember
8. Which of the following is a source of internal financing?
a. revenue
b. depreciation/amortization
c. mortgages
d. long-term borrowings
ANS: B PTS: 1 REF: 16 OBJ: LO 5
BLM: Remember
9. What do investing decisions deal with?
a. the cost of borrowed funds
b. planned downsizing
c. buying non-current assets
d. the financing mix
ANS: C PTS: 1 REF: 19 OBJ: LO 5
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-2
, Chapter 1 Overview of Financial Management
10. What type of decision is the management of working capital?
a. an operating decision
b. an investing decision
c. a financing decision
d. a capital budgeting decision
ANS: A PTS: 1 REF: 23 OBJ: LO 5
BLM: Remember
11. How is gross profit determined?
a. by deducting the cost of sales from revenue
b. by deducting operating expenses from revenue
c. by deducting income tax expense from profit before taxes
d. by deducting distribution costs from operating profit
ANS: A PTS: 1 REF: 13 OBJ: LO 4
BLM: Remember
12. How is ROR calculated?
a. by dividing income before taxes by revenue
b. by dividing cost of sales by revenue
c. by dividing revenue by cost of sales
d. by dividing profit for the year by revenue
ANS: D PTS: 1 REF: 14 OBJ: LO 4
BLM: Higher Order
13. Under which of these circumstances is a company a good investment?
a. A company is a good investment when the ROR is less than the cost of financing.
b. A company is a good investment when the ROA is greater than the cost of
financing.
c. A company is a good investment when the ROA is less than the cost of capital.
d. A company is a good investment when the ROR is greater than the cost of
financing.
ANS: B PTS: 1 REF: 14 OBJ: LO 4
BLM: Higher Order
14. What term is defined as "the activity involved in raising funds and buying assets in order to
obtain the highest possible return”?
a. accounting
b. marketing management
c. general management
d. financial management
ANS: D PTS: 1 REF: 7 OBJ: LO 2
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-3
(Test Bank all Chapters)
Chapter 1 Overview of Financial Management
MULTIPLE CHOICE
1. Which of the following statements describes an activity which is financial management?
a. Looking after trade payables and corporate accounting is not a responsibility of the
controller.
b. Monitoring the profit for the year which is the difference between revenue and
gross profit.
c. The treasurer raising funds.
d. Ensuring that the cost of borrowing is greater than the return on assets.
ANS: C PTS: 1 REF: 11 OBJ: LO 2
BLM: Higher Order
2. Which of the following statements describes a financial management activity?
a. Arranging internal financing is obtained from banks and investors.
b. Ensuring liquidity by managing the payment of dividends.
c. Operating decisions dealing with better utilization of non-current assets.
d. The stability objective is related to the financial structure of a business.
ANS: D PTS: 1 REF: 15 OBJ: LO 4
BLM: Remember
3. Which of the following activities is NOT a financial management function?
a. The treasurer is responsible for corporate accounting.
b. External financing is obtained from investors.
c. Internal financing is obtained from retained earnings and
depreciation/amortization.
d. Improving net profit through the use of productivity indicators and planned
downsizing.
ANS: A PTS: 1 REF: 11 OBJ: LO 3
BLM: Remember
4. What is the ultimate objective of financial management?
a. to ensure the ROA is higher than ROR
b. to obtain a higher ROR than ROA
c. to ensure that ROA is higher than the cost of financing
d. to collect trade receivables faster than the payment of trade and other payables
ANS: C PTS: 1 REF: 7 OBJ: LO 2
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-1
, Chapter 1 Overview of Financial Management
5. Which activity is the controller responsible for?
a. general accounting
b. tax administration
c. investor relations
d. analyzing short- and long-term borrowing sources
ANS: A PTS: 1 REF: 11 OBJ: LO 3
BLM: Remember
6. What is considered an "efficiency" financial objective?
a. the ability to meet short-term financial commitments
b. the ability minimize the cost of borrowed funds
c. the return on trade receivables
d. the return on revenue
ANS: D PTS: 1 REF: 13 OBJ: LO 4
BLM: Remember
7. What does the profit for the year pay for?
a. executive bonuses
b. interest on debt
c. dividends
d. employee salaries
ANS: C PTS: 1 REF: 17 OBJ: LO 5
BLM: Remember
8. Which of the following is a source of internal financing?
a. revenue
b. depreciation/amortization
c. mortgages
d. long-term borrowings
ANS: B PTS: 1 REF: 16 OBJ: LO 5
BLM: Remember
9. What do investing decisions deal with?
a. the cost of borrowed funds
b. planned downsizing
c. buying non-current assets
d. the financing mix
ANS: C PTS: 1 REF: 19 OBJ: LO 5
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-2
, Chapter 1 Overview of Financial Management
10. What type of decision is the management of working capital?
a. an operating decision
b. an investing decision
c. a financing decision
d. a capital budgeting decision
ANS: A PTS: 1 REF: 23 OBJ: LO 5
BLM: Remember
11. How is gross profit determined?
a. by deducting the cost of sales from revenue
b. by deducting operating expenses from revenue
c. by deducting income tax expense from profit before taxes
d. by deducting distribution costs from operating profit
ANS: A PTS: 1 REF: 13 OBJ: LO 4
BLM: Remember
12. How is ROR calculated?
a. by dividing income before taxes by revenue
b. by dividing cost of sales by revenue
c. by dividing revenue by cost of sales
d. by dividing profit for the year by revenue
ANS: D PTS: 1 REF: 14 OBJ: LO 4
BLM: Higher Order
13. Under which of these circumstances is a company a good investment?
a. A company is a good investment when the ROR is less than the cost of financing.
b. A company is a good investment when the ROA is greater than the cost of
financing.
c. A company is a good investment when the ROA is less than the cost of capital.
d. A company is a good investment when the ROR is greater than the cost of
financing.
ANS: B PTS: 1 REF: 14 OBJ: LO 4
BLM: Higher Order
14. What term is defined as "the activity involved in raising funds and buying assets in order to
obtain the highest possible return”?
a. accounting
b. marketing management
c. general management
d. financial management
ANS: D PTS: 1 REF: 7 OBJ: LO 2
BLM: Remember
Copyright © 2014 Nelson Education Ltd. 1-3
