Test Bank – Introduction to Corporate Finance, 5th Canadian Edition – Laurence Booth, Sean Cleary, & Ian Rakita – ISBN 9781119561583 (Full Chapters 1–24 Covered)

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Introduction to
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Corporate Finance
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5th Canadian Edition
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TEST BANK
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Laurence Booth, Sean Cleary, Ian Rakita
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Comprehensive Test Bank for Instructors
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and Students
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9781119561583
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© Laurence Booth, Sean Cleary & Ian Rakita. All rights
reserved. Reproduction or distribution without permission is
prohibited.
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© MEDGEEK

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TABLE OF CONTENTS

Test Bank – Introduction to Corporate Finance (5th Canadian Edition)
Authors: Laurence Booth, Sean Cleary, and Ian Rakita
ISBN: 9781119561583
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PART I: THE FINANCIAL ENVIRONMENT
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Chapter 1: An Introduction to Finance
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Chapter 2: Business (Corporate) Finance
Chapter 3: Financial Statements
Chapter 4: Financial Statement Analysis and Forecasting

PART II: VALUATION AND RISK
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Chapter 5: Time Value of Money
Chapter 6: Bond Valuation and Interest Rates
Chapter 7: Equity Valuation
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Chapter 8: Risk, Return, and Portfolio Theory
Chapter 9: The Capital Asset Pricing Model (CAPM)
Chapter 10: Market Efficiency

PART III: DERIVATIVES AND CAPITAL BUDGETING
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Chapter 11: Forwards, Futures, and Swaps
Chapter 12: Options
Chapter 13: Capital Budgeting, Risk Considerations, and Other Special Issues
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Chapter 14: Cash Flow Estimation and Capital Budgeting Decisions

PART IV: CORPORATE STRATEGY AND FINANCING
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Chapter 15: Mergers and Acquisitions
Chapter 16: Leasing
Chapter 17: Investment Banking and Securities Law
Chapter 18: Debt Instruments
Chapter 19: Equity and Hybrid Instruments
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PART V: CAPITAL STRUCTURE AND WORKING CAPITAL

Chapter 20: Cost of Capital
Chapter 21: Capital Structure Decisions
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Chapter 22: Dividend Policy
Chapter 23: Working Capital Management: General Issues
Chapter 24: Working Capital Management: Current Assets and Current Liabilities
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, Introduction to Corporate Finance, Fifth Edition Booth, Cleary, Rakita
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Chapter 1: An Introduction to Finance

Multiple Choice Questions
1. Section: 1.1 Finance Defined
Learning Objective: 1.1
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Level of difficulty: Basic
CPA: Finance
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Solution: A
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2. Section: 1.2 Real versus Financial Assets
Learning Objective: 1.2
Level of difficulty: Intermediate
CPA: Finance
Solution: C
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Stocks are financial assets. Examples of real assets are residential structures, non-residential
structures, machinery and equipment, durables, inventories, and land.

3. Section: 1.2 Real versus Financial Assets
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Learning Objective: 1.2
Level of difficulty: Basic
CPA: Finance
Solution: D
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4. Section: 1.2 Real Versus Financial Assets
Learning Objective 1.2
Level of difficulty: Basic
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CPA: Finance
Solution:
Liquidity is typically characterized as the ability to change an asset into cash quickly. Many
financial assets, for example investments such as stocks and bonds, trade on public financial
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markets, and their monetary value can be readily realized. In contrast, the process of converting a
real asset, such as real estate, into cash is considered to be much more time consuming.

5. Section: 1.3 The Financial System
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Learning Objective: 1.3
Level of difficulty: Basic
CPA: Finance
Solution: B
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6. Section: 1.3 The Financial System
Learning Objective: 1.3
Level of difficulty: Intermediate
CPA: Finance
Solution: A
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Solutions Manual 1 Chapter 1
Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission is strictly prohibited.

, Introduction to Corporate Finance, Fifth Edition Booth, Cleary, Rakita
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In the financial system, households are the primary fund providers to government and
businesses.

7. Section: 1.3 The Financial System
Learning Objective: 1.3
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Level of difficulty: Intermediate
CPA: Finance
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Solution: C
Banks, pension funds, and insurance firms transform the nature of the underlying financial
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securities. However, mutual funds do not transform the nature of the underlying financial
securities.

8. Section: 1.4 Financial Instruments and Markets
Learning Objective: 1.4
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Level of difficulty: Intermediate
CPA: Finance
Solution: C
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9. Section: 1.4 Financial Instruments and Markets
Learning Objective: 1.4
Level of difficulty: Intermediate
CPA: Finance
Solution:
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A marketable asset is one that can be traded between or among investors after issuance, but
before expiry. The asset‘s market value will also change over time while the asset is outstanding.
In contrast, non-marketable assets cannot be traded between or among investors.
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10. Section 1.5 The Global Financial Community
Learning Objective: 1.5
Level of difficulty: Intermediate
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CPA: Finance
Solution: C
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Practice Problems
Intermediate
11. Section: 1.2 Real versus Financial Assets
Learning Objective: 1.2
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Level of difficulty: Intermediate
CPA: Finance
Solution:
Balance sheet:
Residential structures: $1,000 + $3,000 + $1,500 = $5,500
As there are no foreign assets or liabilities, the net worth or equity of the island is $5,500
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Solutions Manual 2 Chapter 1
Copyright © 2020 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission is strictly prohibited.