Test Bank for Principles of Finance, Chapters 1–20

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TEST BANK
Principles of Finance


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Principles of Finance



Chapter 1
Test Bank
Introduction to Finance

True or False Questions
1. The application of common sense is sufficient for companies to manage their financial
operations.
A. True
B. False
Section 1.1 LO 1 Easy
2. The Financial Industry Regulatory Authority (FINRA) is a US federal institution charged with
enforcement of US financial regulations.
A. True
B. False
Section 1.1 LO 3 Moderate
3. The key common feature of market brokers and dealers is that they both act as
intermediaries.
A. True
B. False
Section 1.5 LO 2 Moderate
4. The term broker refers only to financial firms that buy and sell stock.
A. True
B. False
Section 1.5 LO 2 Difficult

Multiple Choice Questions
1. Business finance looks at how managers apply financial principles to maximize the value of a
firm. Who benefits most when the value of the firm is maximized?
A. Management
B. Employees
C. Shareholders
D. Customers
Section 1.1 LO 1 Moderate



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Principles of Finance

2. Which of the following areas of finance is a more narrowly focused subfield of one of the
other three areas?
A. Business finance
B. Financial markets and institutions
C. Investments
D. Working capital management
Section 1.1 LO 1 Moderate
3. Financial regulations in the United States were significantly expanded and improved
beginning in the 1930s. What was the primary motivation for this regulatory reform and
improvement?
A. To make financial investing more profitable
B. To make markets safer and increase investor confidence
C. To increase tax receipts for the US government
D. To increase unemployment during the Great Depression
Section 1.1 LO 3 Moderate
4. The concepts of risk and return are fundamental to finance and are seen in many applications.
The relationship between risk and return is ________.
A. direct and positive
B. inverse
C. neutral
D. uncorrelated
Section 1.1 LO 3 Moderate
5. Corporate budgets are important because they provide what to companies?
A. Established objectives for the upcoming period
B. Financial statements to submit to regulators
C. A tax-planning tool
D. Share price targets
Section 1.2 LO 2 Moderate
6. Company managers use financial data extensively to make ongoing business decisions within
the firm. Which of the following are external users of a company’s data?
A. Strategic planning staff
B. Department managers
C. Suppliers
D. Internal auditors
Section 1.3 LO 2 Moderate




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Principles of Finance

7. Which type of financial data do companies generally not provide to the public?
A. Balance sheets
B. Income statements
C. Staff salaries
D. Statements of cash flows
Section 1.3 LO 5 Easy
8. According to the US Bureau of Labor Statistics, the finance field is expected to ________ over
the next 10 years.
A. grow and diversify
B. grow but narrow in opportunities
C. contract but diversify
D. contract and narrow in opportunities
Section 1.4 LO 1 Moderate
9. A financial analyst holds an essential position within a corporate or financial firm. Of the many
skills that are needed in this position, which of the following is typically most important?
A. Quantitative and analytical skills
B. Communication skills
C. Adaptability
D. Ability to focus on tasks
Section 1.4 LO 2 Moderate
10. As a financial analyst advances to the role of financial manager, what key attribute is needed
in their new role that was not previously required?
A. Comprehensive strategic thinking skills
B. Highly specific financial skills
C. Strong grasp of financial fundamentals
D. Technical capabilities
Section 1.4 LO 3 Moderate
11. The US Bureau of Labor Statistics predicts that the finance industry will experience a future
job market characterized by what?
A. More jobs at lower salaries
B. More jobs at higher salaries
C. Fewer jobs at lower salaries
D. Fewer jobs at higher salaries
Section 1.4 LO4 Moderate




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