AGEC 330 Final Exam Study Guide – Practice Questions, Flashcards &
Comprehensive Review
Both A and C - ANS ✔✔The four stages that a farm business passes through its life cycle include:
Financial management - ANS ✔✔The ______ of a business, agency, household, or another
economics unit involves the acquisition and use of financial resources and the protection of
equity capital from various sources of risk.
True - ANS ✔✔An efficient information system aids in financial control, risk management, the
meeting of legal requirements and financial planning.
True - ANS ✔✔Budgeting Methods are used to evaluate the future directions of a firm.
False - ANS ✔✔An income statement and a cash flow budget can be used to measure the firm's
financial position at a specific point in time.
Procurement and efficient use of funds - ANS ✔✔Finance function comprises
True - ANS ✔✔At the start of the accounting period, the firm's beginning balance sheet is the
source of current and non-current assets.
The creation of value for shareholders - ANS ✔✔The focal point of financial management in a
corporate firm is
True - ANS ✔✔An enterprise budget is a financial management tool used to project costs and
returns for an activity- such as livestock, grain or vegetable production.
,True - ANS ✔✔Financial management involves the acquisition and use of financial resources
True - ANS ✔✔Life Insurance Companies make loans to farmers.
False - ANS ✔✔The life cycle effect uses information about past, present, and expected business
performance comes in part from a financial accounting system that reports the firm's
profitability, liquidity, and solvency positions.
All of the above - ANS ✔✔Information flows can be obtained from the financial statements that
reports _______ of a firm.
Cash Flow - ANS ✔✔Budgeting Methods are used to evaluate the future directions of a firm. For
agricultural firms, emphasis is typically placed on enterprise budgets, ______ budgets, and
capital budgets.
True - ANS ✔✔An enterprise budget is a financial management tool used to project costs and
returns for an activity- such as livestock, grain or vegetable production.
T - ANS ✔✔The impacts of time and risk are important in financial management.
F - ANS ✔✔A partial budget is a financial management tool used to project all costs and returns
for an activity- such as livestock, grain or vegetable production.
The creation of value for shareholders - ANS ✔✔The focal point of financial management in a
corporate firm is
T - ANS ✔✔Accounting tools consist of the balance sheet, income statement, and cash flow
statement.
,T - ANS ✔✔The first step of the strategic management process is to establish the future
direction of the firm and to articulate a mission statement.
T - ANS ✔✔The maturity of debt securities traded in the bond market is greater than 1 year.
T - ANS ✔✔In an efficient market, prices are adjusted for information.
T - ANS ✔✔One of the key components of financial investing is that there is no expected high
return without bearing high risk.
T - ANS ✔✔An options contract is a contingent claim. It gives holders the right to buy or sell
something at a specific price during a period of time.
A and B - ANS ✔✔Financial investments can be made by investing money in
T - ANS ✔✔Businesses are net Suppliers of securities.
F - ANS ✔✔Bond holders are in a residual position in regards to claims on income and assets.
F - ANS ✔✔The maturity of debt securities traded in the money market is more than 1 year.
F - ANS ✔✔Portfolio risk cannot be reduced with a mix of securities and by investing in stocks
with different characteristics.
Options contract - ANS ✔✔A contract the gives the holder the right to buy or sell something at
a particular price during a period in time is
F - ANS ✔✔High risk reaps a high return is not one of the keys to financial investing.
, T - ANS ✔✔Businesses are net Suppliers of securities.
F - ANS ✔✔The maturity of debt securities traded in the bond market is less than 1 year.
F - ANS ✔✔The maturity of debt securities traded in the money market is more than 1 year.
F - ANS ✔✔Portfolio risk cannot be reduced with a mix of securities and by investing in stocks
with different characteristics.
F - ANS ✔✔Bonds promise an uncertain payment per period and returns principal at maturity.
T - ANS ✔✔In an efficient market, prices are adjusted for information.
T - ANS ✔✔People use money to invest in real goods, invest in financial goods, and
consumption.
$19,699 - ANS ✔✔Suppose you have the opportunity to purchase a 7-year annuity that pays
you $2,000 per year starting in one year for each of the next seven years and you can purchase
the annuity for $11,000.
Suppose you take the $11,000 today and put this money in a bank account paying 6% interest.
Calculate how much money you have in your bank account at the end of 10 years.
Compound interest - ANS ✔✔An interest where each time interest is paid, it is added to the
principal and therefore earns interest.
Comprehensive Review
Both A and C - ANS ✔✔The four stages that a farm business passes through its life cycle include:
Financial management - ANS ✔✔The ______ of a business, agency, household, or another
economics unit involves the acquisition and use of financial resources and the protection of
equity capital from various sources of risk.
True - ANS ✔✔An efficient information system aids in financial control, risk management, the
meeting of legal requirements and financial planning.
True - ANS ✔✔Budgeting Methods are used to evaluate the future directions of a firm.
False - ANS ✔✔An income statement and a cash flow budget can be used to measure the firm's
financial position at a specific point in time.
Procurement and efficient use of funds - ANS ✔✔Finance function comprises
True - ANS ✔✔At the start of the accounting period, the firm's beginning balance sheet is the
source of current and non-current assets.
The creation of value for shareholders - ANS ✔✔The focal point of financial management in a
corporate firm is
True - ANS ✔✔An enterprise budget is a financial management tool used to project costs and
returns for an activity- such as livestock, grain or vegetable production.
,True - ANS ✔✔Financial management involves the acquisition and use of financial resources
True - ANS ✔✔Life Insurance Companies make loans to farmers.
False - ANS ✔✔The life cycle effect uses information about past, present, and expected business
performance comes in part from a financial accounting system that reports the firm's
profitability, liquidity, and solvency positions.
All of the above - ANS ✔✔Information flows can be obtained from the financial statements that
reports _______ of a firm.
Cash Flow - ANS ✔✔Budgeting Methods are used to evaluate the future directions of a firm. For
agricultural firms, emphasis is typically placed on enterprise budgets, ______ budgets, and
capital budgets.
True - ANS ✔✔An enterprise budget is a financial management tool used to project costs and
returns for an activity- such as livestock, grain or vegetable production.
T - ANS ✔✔The impacts of time and risk are important in financial management.
F - ANS ✔✔A partial budget is a financial management tool used to project all costs and returns
for an activity- such as livestock, grain or vegetable production.
The creation of value for shareholders - ANS ✔✔The focal point of financial management in a
corporate firm is
T - ANS ✔✔Accounting tools consist of the balance sheet, income statement, and cash flow
statement.
,T - ANS ✔✔The first step of the strategic management process is to establish the future
direction of the firm and to articulate a mission statement.
T - ANS ✔✔The maturity of debt securities traded in the bond market is greater than 1 year.
T - ANS ✔✔In an efficient market, prices are adjusted for information.
T - ANS ✔✔One of the key components of financial investing is that there is no expected high
return without bearing high risk.
T - ANS ✔✔An options contract is a contingent claim. It gives holders the right to buy or sell
something at a specific price during a period of time.
A and B - ANS ✔✔Financial investments can be made by investing money in
T - ANS ✔✔Businesses are net Suppliers of securities.
F - ANS ✔✔Bond holders are in a residual position in regards to claims on income and assets.
F - ANS ✔✔The maturity of debt securities traded in the money market is more than 1 year.
F - ANS ✔✔Portfolio risk cannot be reduced with a mix of securities and by investing in stocks
with different characteristics.
Options contract - ANS ✔✔A contract the gives the holder the right to buy or sell something at
a particular price during a period in time is
F - ANS ✔✔High risk reaps a high return is not one of the keys to financial investing.
, T - ANS ✔✔Businesses are net Suppliers of securities.
F - ANS ✔✔The maturity of debt securities traded in the bond market is less than 1 year.
F - ANS ✔✔The maturity of debt securities traded in the money market is more than 1 year.
F - ANS ✔✔Portfolio risk cannot be reduced with a mix of securities and by investing in stocks
with different characteristics.
F - ANS ✔✔Bonds promise an uncertain payment per period and returns principal at maturity.
T - ANS ✔✔In an efficient market, prices are adjusted for information.
T - ANS ✔✔People use money to invest in real goods, invest in financial goods, and
consumption.
$19,699 - ANS ✔✔Suppose you have the opportunity to purchase a 7-year annuity that pays
you $2,000 per year starting in one year for each of the next seven years and you can purchase
the annuity for $11,000.
Suppose you take the $11,000 today and put this money in a bank account paying 6% interest.
Calculate how much money you have in your bank account at the end of 10 years.
Compound interest - ANS ✔✔An interest where each time interest is paid, it is added to the
principal and therefore earns interest.
