TEST BANK
FINANCIAL MANAGEMENT: CORE CONCEPTS
1
Copyright © 2025 Pearson Education, Inc.
, Table of Contents
PART 1: FUNDAMENTAL CONCEPTS AND BASIC
TOOLS OF FINANCE
1. Financial Management
2. Financial Statements
3. The Time Value of Money (Part 1)
4. The Time Value of Money (Part 2)
5. Interest Rates
PART 2: VALUING STOCKS AND BONDS AND
UNDERSTANDING RISK AND RETURN
6. Bonds and Bond Valuation
7. Stocks and Stock Valuation
8. Risk and Return
PART 3: CAPITAL BUDGETING
9. Capital Budgeting Decision Models
10. Cash Flow Estimation
11. The Cost of Capital
PART 4: FINANCIAL PLANNING AND EVALUATING
PERFORMANCE
12. Forecasting and Short-Term Financial Planning
13. Working Capital Management
14. Financial Ratios and Firm Performance
PART 5: OTHER SELECTED FINANCE TOPICS
15. Raising Capital
16. Capital Structure
17. Dividends, Dividend Policy, and Stock Splits
18. International Financial Management
2
Copyright © 2025 Pearson Education, Inc.
,Test Bank For
Financial Management Core Concepts, 5th Edition Raymond Brooks Jimmy Yang
Chapter 1-18
Chapter 1 Financial Management
1.1 The Cycle Of Money
1) At Its Most Basic Level, The Function Of Financial Intermediaries Is To .
A) Track And Report Interest Rates
B) Move Money From Lenders To Borrowers And Back Again
C) Report All Financial Transactions To The Federal Government
D) Effect A Transfer Of Wealth In
Society
Answer: B
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
2) Which Of The Following Is Not An Example Of A Financial Transaction?
A) Your Parents Use Their Credit Card To Pay For Your Current Term's College Tuition.
B) You Use The Atm At Heathrow Airport In London To Withdraw British Pounds.
C) Your Roommate Lends You $20 And You Repay It In One Week.
D) All Of The Above Are Financial
Transactions.
Answer: D
Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
3) The Movement Of Money From Lender To Borrower And Back Again Is Known As .
A) The Circle Of Life
B) Corporate Finance
C) The Cycle Of Money
D) Money
Laundering
Answer: C
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
Hmwrk Questions: * Taken From "Prepping For Exams" Questions At The End Of The Chapter.
3
Copyright © 2025 Pearson Education, Inc.
,4) The Common Objective Of Borrowing And Lending Is To .
A) Make All Parties Better Off
B) Gain A Profit At The Other's Expense
C) Make A Firm Or Individual Appear More Liquid Than Is Really The Case
D) Thwart Regulatory
Authority
Answer: A
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
5) Which Of The Following Is Not A Function Of A Financial Intermediary In
The Lending/Borrowing Process?
A) To Help Establish Terms Of The Lending/Borrowing Agreement
B) To Match The Borrower And The Lender
C) To Bear The Risk That The Lender Will Not Repay
D) To Bear The Risk That The Borrower Will Not
Repay
Answer: C
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
6) Professor Gaston, Your History Teacher, Borrows Money At A Rate Of 6% Per Year From
The Valley State Bank For A Tuition Loan For Her Son. You Have $1,200 Deposited Into
Your Checking Account At The Same Bank Earning A Rate Of 0.5% Per Year. Which Of The
Following Statements Is True?
A) The Bank Is Criminally Liable To You For Paying An Interest Rate Lower Than The
Expected Rate Of Inflation.
B) You And Your Professor Have An Obvious Conflict Of Interest Because You Have
Accounts At The Same Financial Institution.
C) You Benefit From Earning Interest On Your Deposit, Safety For Your Funds, And
Having A Recognizable Means For Paying For Your Financial Obligations Without
Having To Hold Cash.
D) Your Professor Is The Only Party To Be Made Worse Off By This Example Because She Is
The Only Party Paying Net Interest.
Answer: C
Explanation: Both You And Your Professor Are Using Services Typically Provided By Banks.
There Is No Conflict Of Interest.
Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
4
Copyright © 2025 Pearson Education, Inc.
,7) The Basic Function Of Financial Intermediaries Is To Move Advice From Lenders To
Borrowers And Back To Lenders.
Answer: False
Explanation: The Basic Function Of Financial Intermediaries Is To Move Money From Lenders To
Borrowers And Back To Lenders.
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
8) In The Lending/Borrowing Process, A Financial Intermediary Function Is To Bear The Risk
That The Borrower Will Not Repay.
Answer: True
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
9) All Financial Transactions Have A Buyer And A
Seller. Answer: True
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
10) Give Three Examples Of A Financial Transaction.
Answer: (1) Your Parents Use Their Credit Card To Pay Some Of Your College Expenses.
(2) You Use The Atm To Withdraw Funds So You Can Buy Your Best Friend A Birthday Gift.
(3) Your Roommate Lends You $20 And You Repay It When You Get Your Next Pay
Check. Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
1.2 Overview Of Finance Areas
1) Which Of The Following Best Identifies The Four Main Areas Of Finance?
A) Exchange Rate Management, Investments, Financial Institutions And Markets,
International Finance
B) Corporate Finance, Investments, Capital Structure, International Finance
C) Corporate Finance, Investments, Financial Institutions And Markets, International Finance
D) Corporate Finance, Capital Budgeting, Financial Institutions And Markets,
Regulation Answer: C
5
Copyright © 2025 Pearson Education, Inc.
,Explanation: Exchange Rate Management, Capital Structure, And Capital Budgeting Are
Activities Within The Functional Areas Of Finance.
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
2) Of The Following, Which Is Not One Of The Four Main Areas Of Finance?
A) International Finance
B) Corporate Finance
C) Investments
D) Working Capital
Management Answer: D
Explanation: Wcm Is A Primary Function Of Corporate Finance.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
3) The Set Of Financial Activities That Support The Operations Of A Business Is Best
Described By Which Main Area Of Finance?
A) Corporate Finance
B) Investments
C) Financial Institutions And Markets
D) International
Finance Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
4) Is The Area Of Finance Concerned With Activities Such As Borrowing Funds To
Finance Long-Term Projects; For Example, Plant Expansions Or New Product Launches.
A) Working Capital Management
B) International Finance
C) Investments
D) Corporate
Finance Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
5) Is The Area Of Finance Concerned With Activities Such As Repayment Of
6
Copyright © 2025 Pearson Education, Inc.
,Borrowed Funds Through Dividends Or Interest Payments.
A) Investments
B) Corporate Finance
C) Capital Budgeting
D) International
Finance Answer: B
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
6) Is The Area Of Finance Concerned With The Activities Of Buying And Selling
Financial Assets Such As Stocks And Bonds.
A) Investments
B) Corporate Finance
C) International Finance
D) Financial Markets And
Institutions Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
Hmwrk Questions: * Taken From "Prepping For Exams" Questions At The End Of The Chapter.
7) Which Of The Following Is Not Typically Thought Of As An Investment Activity?
A) Accurately Pricing Financial Assets
B) The Process Of Buying And Selling Financial Assets
C) Repaying Borrowed Funds
D) Negotiating The Rules And Regulations Of Financial
Transactions Answer: C
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
8) "The Organized Financial Intermediaries And The Forums That Promote The Cycle Of
Money" Is A Good Definition Of Which Of The Following Main Areas Of Finance?
A) Corporate Finance
B) Investments
C) Financial Institutions And Markets
D) International
Finance Answer: C
Diff: 1
Topic: 1.2 Overview Of Finance Areas
7
Copyright © 2025 Pearson Education, Inc.
,Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
9) Financial Institutions And Markets .
A) Are The Organized Financial Intermediaries And The Forums That Promote The Cycle Of Money
B) Compose The Set Of Financial Activities That Support The Operations Of A Business
C) Are The Activities Centered On The Purchase And Sale Of Financial Assets
D) Are Concerned Only With The Addition Of A Multinational Element To All Finance
Activities Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
10) Of The Following, Which Is Not An Example Of A Financial Intermediary?
A) Commercial Bank
B) Insurance Company
C) Investment Bank
D) All Of The Above Are Financial
Intermediaries. Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
11) Of The Following, Which Is Not An Activity Engaged In By A Financial Intermediary?
A) Matching Borrowers And Lenders
B) Bearing Risk
C) Managing Retirement Portfolios For Large Classes Of Employees
D) Enforcement Of Regulations Including The Application Of Fines For Financial
Violations Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
12) "Concern With The Multinational Elements Of Financial Activities" Best Describes Which
Of The Four Main Areas Of Finance?
A) Investments
B) International Finance
C) Corporate Finance
D) Financial Institutions And
Markets Answer: B
Diff: 1
8
Copyright © 2025 Pearson Education, Inc.
,Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
13) Which Of The Following Is A Reason Why Expertise In International Finance Is Important?
A) The Process Of Assessing Risk Among Many Countries Is More Difficult Than Assessing
Risk For A Single Country.
B) Financial Regulatory Rules And Requirements Differ From Country To Country.
C) Changes In Economic Conditions Impact The Relative Values Of Currency Among Countries.
D) All Of The Above Are Reasons For Gaining Expertise In International
Finance. Answer: D
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
14) Which Of The Following Is Not An Activity Of A Financial Institution Or Market?
A) Bringing Together Buyers And Sellers Of Financial Assets
B) Providing A Market For The Transaction Of Financial Assets
C) Providing Information To Buyers And/Or Sellers Of Financial Assets
D) All Are Activities Of Financial
Institutions. Answer: D
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
15) Financial Markets And Institutions Is The Set Of Activities Generally Concerned With The
Buying And Selling Of Financial Assets Such As Stocks And Bonds.
Answer: False
Explanation: Investments Are The Set Of Activities Generally Concerned With The Buying
And Selling Of Financial Assets Such As Stocks And Bonds.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
16) Financial Institutions And Markets Are The Organized Financial Intermediaries And The
Forums That Promote The Cycle Of Money.
Answer: True
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
9
Copyright © 2025 Pearson Education, Inc.
, Activities That Each Encompasses.
17) The Four Main Areas Of Finance (Corporate, Investments, Financial Markets And
Institutions, And International Finance) Are Mutually Exclusive Topics.
Answer: False
Explanation: The Four Main Areas Of Finance (Corporate, Investments, Financial Markets And
Institutions, And International Finance) Are Not Mutually Exclusive Topics.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
18) Gold And Land Are Considered "Real Assets" Because They Are Permanent,
Whereas A Commodity Such As Rice Is Not A Real Asset Because It Is
Consumable.
Answer: False
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
19) What Are The Four Main Areas Of Finance? Give A Brief Definition Of Each.
Answer: The Four Main Areas Of Finance Are Corporate Finance, Investments, Financial
Institutions And Markets, And International Finance. Corporate Finance Deals With The
Financial Operations Of The Firm And Focuses On Capital Budgeting, Capital Structure, And
Working Capital Management. It Is The Primary Focus Of This Text. Investments Focuses On
The Activities Associated With The Buying, Selling, Pricing, And Risk Evaluation Of Financial
Assets. It Is Commonly The Part Of Finance Most Interesting To Students. Financial Institutions
And Markets Is The Study Of The Firms And Organizations That Facilitate And Regulate The
Trading Of Financial Assets As Well As The Markets That Make The Trading Possible.
International Finance Deals With The Multinational Aspects Of The Other Three Areas Of
Finance. Decision-Making In The International Arena Is Complicated By Language Differences,
Currency Differences, Taxation Issues And Differences In Local And National Laws. An
Expertise In International Finance Is A Valuable Asset To Firms That Have Business Dealings
That Span More Than One Country.
Diff: 3
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
10
Copyright © 2025 Pearson Education, Inc.
FINANCIAL MANAGEMENT: CORE CONCEPTS
1
Copyright © 2025 Pearson Education, Inc.
, Table of Contents
PART 1: FUNDAMENTAL CONCEPTS AND BASIC
TOOLS OF FINANCE
1. Financial Management
2. Financial Statements
3. The Time Value of Money (Part 1)
4. The Time Value of Money (Part 2)
5. Interest Rates
PART 2: VALUING STOCKS AND BONDS AND
UNDERSTANDING RISK AND RETURN
6. Bonds and Bond Valuation
7. Stocks and Stock Valuation
8. Risk and Return
PART 3: CAPITAL BUDGETING
9. Capital Budgeting Decision Models
10. Cash Flow Estimation
11. The Cost of Capital
PART 4: FINANCIAL PLANNING AND EVALUATING
PERFORMANCE
12. Forecasting and Short-Term Financial Planning
13. Working Capital Management
14. Financial Ratios and Firm Performance
PART 5: OTHER SELECTED FINANCE TOPICS
15. Raising Capital
16. Capital Structure
17. Dividends, Dividend Policy, and Stock Splits
18. International Financial Management
2
Copyright © 2025 Pearson Education, Inc.
,Test Bank For
Financial Management Core Concepts, 5th Edition Raymond Brooks Jimmy Yang
Chapter 1-18
Chapter 1 Financial Management
1.1 The Cycle Of Money
1) At Its Most Basic Level, The Function Of Financial Intermediaries Is To .
A) Track And Report Interest Rates
B) Move Money From Lenders To Borrowers And Back Again
C) Report All Financial Transactions To The Federal Government
D) Effect A Transfer Of Wealth In
Society
Answer: B
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
2) Which Of The Following Is Not An Example Of A Financial Transaction?
A) Your Parents Use Their Credit Card To Pay For Your Current Term's College Tuition.
B) You Use The Atm At Heathrow Airport In London To Withdraw British Pounds.
C) Your Roommate Lends You $20 And You Repay It In One Week.
D) All Of The Above Are Financial
Transactions.
Answer: D
Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
3) The Movement Of Money From Lender To Borrower And Back Again Is Known As .
A) The Circle Of Life
B) Corporate Finance
C) The Cycle Of Money
D) Money
Laundering
Answer: C
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
Hmwrk Questions: * Taken From "Prepping For Exams" Questions At The End Of The Chapter.
3
Copyright © 2025 Pearson Education, Inc.
,4) The Common Objective Of Borrowing And Lending Is To .
A) Make All Parties Better Off
B) Gain A Profit At The Other's Expense
C) Make A Firm Or Individual Appear More Liquid Than Is Really The Case
D) Thwart Regulatory
Authority
Answer: A
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
5) Which Of The Following Is Not A Function Of A Financial Intermediary In
The Lending/Borrowing Process?
A) To Help Establish Terms Of The Lending/Borrowing Agreement
B) To Match The Borrower And The Lender
C) To Bear The Risk That The Lender Will Not Repay
D) To Bear The Risk That The Borrower Will Not
Repay
Answer: C
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
6) Professor Gaston, Your History Teacher, Borrows Money At A Rate Of 6% Per Year From
The Valley State Bank For A Tuition Loan For Her Son. You Have $1,200 Deposited Into
Your Checking Account At The Same Bank Earning A Rate Of 0.5% Per Year. Which Of The
Following Statements Is True?
A) The Bank Is Criminally Liable To You For Paying An Interest Rate Lower Than The
Expected Rate Of Inflation.
B) You And Your Professor Have An Obvious Conflict Of Interest Because You Have
Accounts At The Same Financial Institution.
C) You Benefit From Earning Interest On Your Deposit, Safety For Your Funds, And
Having A Recognizable Means For Paying For Your Financial Obligations Without
Having To Hold Cash.
D) Your Professor Is The Only Party To Be Made Worse Off By This Example Because She Is
The Only Party Paying Net Interest.
Answer: C
Explanation: Both You And Your Professor Are Using Services Typically Provided By Banks.
There Is No Conflict Of Interest.
Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
4
Copyright © 2025 Pearson Education, Inc.
,7) The Basic Function Of Financial Intermediaries Is To Move Advice From Lenders To
Borrowers And Back To Lenders.
Answer: False
Explanation: The Basic Function Of Financial Intermediaries Is To Move Money From Lenders To
Borrowers And Back To Lenders.
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
8) In The Lending/Borrowing Process, A Financial Intermediary Function Is To Bear The Risk
That The Borrower Will Not Repay.
Answer: True
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
9) All Financial Transactions Have A Buyer And A
Seller. Answer: True
Diff: 1
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
10) Give Three Examples Of A Financial Transaction.
Answer: (1) Your Parents Use Their Credit Card To Pay Some Of Your College Expenses.
(2) You Use The Atm To Withdraw Funds So You Can Buy Your Best Friend A Birthday Gift.
(3) Your Roommate Lends You $20 And You Repay It When You Get Your Next Pay
Check. Diff: 2
Topic: 1.1 The Cycle Of Money Aacsb:
Analytical Thinking
Lo: 1.1 Describe The Cycle Of Money, The Participants In The Cycle, And The Common Objective
Of Borrowing And Lending.
1.2 Overview Of Finance Areas
1) Which Of The Following Best Identifies The Four Main Areas Of Finance?
A) Exchange Rate Management, Investments, Financial Institutions And Markets,
International Finance
B) Corporate Finance, Investments, Capital Structure, International Finance
C) Corporate Finance, Investments, Financial Institutions And Markets, International Finance
D) Corporate Finance, Capital Budgeting, Financial Institutions And Markets,
Regulation Answer: C
5
Copyright © 2025 Pearson Education, Inc.
,Explanation: Exchange Rate Management, Capital Structure, And Capital Budgeting Are
Activities Within The Functional Areas Of Finance.
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
2) Of The Following, Which Is Not One Of The Four Main Areas Of Finance?
A) International Finance
B) Corporate Finance
C) Investments
D) Working Capital
Management Answer: D
Explanation: Wcm Is A Primary Function Of Corporate Finance.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
3) The Set Of Financial Activities That Support The Operations Of A Business Is Best
Described By Which Main Area Of Finance?
A) Corporate Finance
B) Investments
C) Financial Institutions And Markets
D) International
Finance Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
4) Is The Area Of Finance Concerned With Activities Such As Borrowing Funds To
Finance Long-Term Projects; For Example, Plant Expansions Or New Product Launches.
A) Working Capital Management
B) International Finance
C) Investments
D) Corporate
Finance Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
5) Is The Area Of Finance Concerned With Activities Such As Repayment Of
6
Copyright © 2025 Pearson Education, Inc.
,Borrowed Funds Through Dividends Or Interest Payments.
A) Investments
B) Corporate Finance
C) Capital Budgeting
D) International
Finance Answer: B
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
6) Is The Area Of Finance Concerned With The Activities Of Buying And Selling
Financial Assets Such As Stocks And Bonds.
A) Investments
B) Corporate Finance
C) International Finance
D) Financial Markets And
Institutions Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
Hmwrk Questions: * Taken From "Prepping For Exams" Questions At The End Of The Chapter.
7) Which Of The Following Is Not Typically Thought Of As An Investment Activity?
A) Accurately Pricing Financial Assets
B) The Process Of Buying And Selling Financial Assets
C) Repaying Borrowed Funds
D) Negotiating The Rules And Regulations Of Financial
Transactions Answer: C
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
8) "The Organized Financial Intermediaries And The Forums That Promote The Cycle Of
Money" Is A Good Definition Of Which Of The Following Main Areas Of Finance?
A) Corporate Finance
B) Investments
C) Financial Institutions And Markets
D) International
Finance Answer: C
Diff: 1
Topic: 1.2 Overview Of Finance Areas
7
Copyright © 2025 Pearson Education, Inc.
,Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
9) Financial Institutions And Markets .
A) Are The Organized Financial Intermediaries And The Forums That Promote The Cycle Of Money
B) Compose The Set Of Financial Activities That Support The Operations Of A Business
C) Are The Activities Centered On The Purchase And Sale Of Financial Assets
D) Are Concerned Only With The Addition Of A Multinational Element To All Finance
Activities Answer: A
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
10) Of The Following, Which Is Not An Example Of A Financial Intermediary?
A) Commercial Bank
B) Insurance Company
C) Investment Bank
D) All Of The Above Are Financial
Intermediaries. Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
11) Of The Following, Which Is Not An Activity Engaged In By A Financial Intermediary?
A) Matching Borrowers And Lenders
B) Bearing Risk
C) Managing Retirement Portfolios For Large Classes Of Employees
D) Enforcement Of Regulations Including The Application Of Fines For Financial
Violations Answer: D
Diff: 2
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
12) "Concern With The Multinational Elements Of Financial Activities" Best Describes Which
Of The Four Main Areas Of Finance?
A) Investments
B) International Finance
C) Corporate Finance
D) Financial Institutions And
Markets Answer: B
Diff: 1
8
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,Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
13) Which Of The Following Is A Reason Why Expertise In International Finance Is Important?
A) The Process Of Assessing Risk Among Many Countries Is More Difficult Than Assessing
Risk For A Single Country.
B) Financial Regulatory Rules And Requirements Differ From Country To Country.
C) Changes In Economic Conditions Impact The Relative Values Of Currency Among Countries.
D) All Of The Above Are Reasons For Gaining Expertise In International
Finance. Answer: D
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
14) Which Of The Following Is Not An Activity Of A Financial Institution Or Market?
A) Bringing Together Buyers And Sellers Of Financial Assets
B) Providing A Market For The Transaction Of Financial Assets
C) Providing Information To Buyers And/Or Sellers Of Financial Assets
D) All Are Activities Of Financial
Institutions. Answer: D
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
15) Financial Markets And Institutions Is The Set Of Activities Generally Concerned With The
Buying And Selling Of Financial Assets Such As Stocks And Bonds.
Answer: False
Explanation: Investments Are The Set Of Activities Generally Concerned With The Buying
And Selling Of Financial Assets Such As Stocks And Bonds.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
16) Financial Institutions And Markets Are The Organized Financial Intermediaries And The
Forums That Promote The Cycle Of Money.
Answer: True
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
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, Activities That Each Encompasses.
17) The Four Main Areas Of Finance (Corporate, Investments, Financial Markets And
Institutions, And International Finance) Are Mutually Exclusive Topics.
Answer: False
Explanation: The Four Main Areas Of Finance (Corporate, Investments, Financial Markets And
Institutions, And International Finance) Are Not Mutually Exclusive Topics.
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
18) Gold And Land Are Considered "Real Assets" Because They Are Permanent,
Whereas A Commodity Such As Rice Is Not A Real Asset Because It Is
Consumable.
Answer: False
Diff: 1
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
19) What Are The Four Main Areas Of Finance? Give A Brief Definition Of Each.
Answer: The Four Main Areas Of Finance Are Corporate Finance, Investments, Financial
Institutions And Markets, And International Finance. Corporate Finance Deals With The
Financial Operations Of The Firm And Focuses On Capital Budgeting, Capital Structure, And
Working Capital Management. It Is The Primary Focus Of This Text. Investments Focuses On
The Activities Associated With The Buying, Selling, Pricing, And Risk Evaluation Of Financial
Assets. It Is Commonly The Part Of Finance Most Interesting To Students. Financial Institutions
And Markets Is The Study Of The Firms And Organizations That Facilitate And Regulate The
Trading Of Financial Assets As Well As The Markets That Make The Trading Possible.
International Finance Deals With The Multinational Aspects Of The Other Three Areas Of
Finance. Decision-Making In The International Arena Is Complicated By Language Differences,
Currency Differences, Taxation Issues And Differences In Local And National Laws. An
Expertise In International Finance Is A Valuable Asset To Firms That Have Business Dealings
That Span More Than One Country.
Diff: 3
Topic: 1.2 Overview Of Finance Areas
Aacsb: Analytical Thinking
Lo: 1.2 Distinguish The Four Main Areas Of Finance And Briefly Explain The Financial
Activities That Each Encompasses.
10
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