BUSI 1301 FINAL REVIEW UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. The extent to which retained earnings are used as a
source of long-term capital for a firm, depends on the
state of the economy.
Answer:
true
Question:
2. When conflicts arise between the long-term interests of
owners and those of other stakeholders, the fiduciary
duty required of financial managers generally leads them
to make decisions that are most consistent with the
interests of ownership.
Answer:
true
Question:
3. _____ are safe and highly liquid assets that many firms list
with their cash holdings on their balance sheet.
Answer:
cash equivalents
3 multiple choice options
Question:
4. David needs to acquire financial capital to purchase a
printing press for his business. David can either acquire
the financial capital for the press by borrowing money
from a bank or by purchasing the press on credit from his
supplier.
Answer:
true
Question:
5. The current ratio is calculated by dividing a firm's current
liabilities by its total assets.
Answer:
false
,Question:
6. Benny-Duke Inc. reported a net income of $7 million but
paid no dividends to its shareholders. The shareholders
should sue the company for failure to provide a return on
their equity investment.
Answer:
false
Question:
7. Return-on-equity indicates how much net income a firm
earned per share of common stock outstanding.
Answer:
false
Question:
8. A manufacturing firm does not necessarily need an
inventory of parts and materials to assemble its products.
Answer:
false
Question:
9. Because it is normally unsecured, commercial paper is
only offered by firms with no credit ratings.
Answer:
false
Question:
10. Accounts receivable represents what customers who buy
on credit owe the firm.
Answer:
true
Question:
11. Certificate of deposit is an interest-earning deposit that
requires the funds to remain deposited for a fixed term.
Answer:
true
, Question:
12. Term loans issued by commercial banks are popularly
used by financial institutions and large corporations
because they typically carry lower interest rates than
commercial paper.
Answer:
false
Question:
13. A factor is a restriction lenders impose on borrowers as a
condition of providing long-term debt financing.
Answer:
false
Question:
14. In the context of accounting for the time value of money,
discount rate remains constant in a specified number of
time periods.
Answer:
false
Question:
15. Leverage ratios measure the extent to which a firm uses
_____.
Answer:
financial leverage
3 multiple choice options
Question:
16. Cash budgets normally cover a one-year period and
show projected cash inflows and outflows for each
month.
Answer:
true
Question:
17. A disadvantage of debt financing is that creditors often
impose covenants on the borrower.
Answer:
true
QUESTIONS AND CORRECT ANSWERS
Question:
1. The extent to which retained earnings are used as a
source of long-term capital for a firm, depends on the
state of the economy.
Answer:
true
Question:
2. When conflicts arise between the long-term interests of
owners and those of other stakeholders, the fiduciary
duty required of financial managers generally leads them
to make decisions that are most consistent with the
interests of ownership.
Answer:
true
Question:
3. _____ are safe and highly liquid assets that many firms list
with their cash holdings on their balance sheet.
Answer:
cash equivalents
3 multiple choice options
Question:
4. David needs to acquire financial capital to purchase a
printing press for his business. David can either acquire
the financial capital for the press by borrowing money
from a bank or by purchasing the press on credit from his
supplier.
Answer:
true
Question:
5. The current ratio is calculated by dividing a firm's current
liabilities by its total assets.
Answer:
false
,Question:
6. Benny-Duke Inc. reported a net income of $7 million but
paid no dividends to its shareholders. The shareholders
should sue the company for failure to provide a return on
their equity investment.
Answer:
false
Question:
7. Return-on-equity indicates how much net income a firm
earned per share of common stock outstanding.
Answer:
false
Question:
8. A manufacturing firm does not necessarily need an
inventory of parts and materials to assemble its products.
Answer:
false
Question:
9. Because it is normally unsecured, commercial paper is
only offered by firms with no credit ratings.
Answer:
false
Question:
10. Accounts receivable represents what customers who buy
on credit owe the firm.
Answer:
true
Question:
11. Certificate of deposit is an interest-earning deposit that
requires the funds to remain deposited for a fixed term.
Answer:
true
, Question:
12. Term loans issued by commercial banks are popularly
used by financial institutions and large corporations
because they typically carry lower interest rates than
commercial paper.
Answer:
false
Question:
13. A factor is a restriction lenders impose on borrowers as a
condition of providing long-term debt financing.
Answer:
false
Question:
14. In the context of accounting for the time value of money,
discount rate remains constant in a specified number of
time periods.
Answer:
false
Question:
15. Leverage ratios measure the extent to which a firm uses
_____.
Answer:
financial leverage
3 multiple choice options
Question:
16. Cash budgets normally cover a one-year period and
show projected cash inflows and outflows for each
month.
Answer:
true
Question:
17. A disadvantage of debt financing is that creditors often
impose covenants on the borrower.
Answer:
true
