ABNORMAL PSYCHOLOGY MIDTERM ACTUAL PAPER
Questions with Correct Answers (Grade A+)
Question 1: Financial management.
Answer: aka corporate finance, focuses on decisions relating to how much and what types of assets to
acquire, how to raise the capital needed to purchase assets, and how to run the firm so as to maximize its
value.
Question 2: Capital markets.
Answer: relate to the markets where interest rates, along with stocks and bond prices are determined
Question 3: Investments.
Answer: relate to decisions concerning stocks and bonds
Question 4: Security analysis.
Answer: deals with finding the proper values of individual securities (ie stocks & bonds)
Question 5: Portfolio theory.
Answer: This theory deals with the best way to structure portfolios, or "baskets", of stocks and bonds
Question 6: Market analysis.
Answer: A type of analysis which deals with the issue of whether stock and bond markets at any given time
are "too low" or "about right"
Question 7: Behavioral finance.
Answer: (part of market analysis) is where investor psycology is examined in an effort to determine if stock
prices have been bid up to unreasonable heights in a speculative bubble or driven down to unreasonable
lows in a fit of irrational pessimism
Question 8: Sarbanes-Oxley Act.
Answer: A law passed by Congress that requires the CEO and CFO to certify that their firm's financial
statements are accurate
Question 9: Chief Operating Officer (COO).
Answer: Marketing, Production, Human Resources, and other Operating Departments
Page 1
, Question 10: Chief Financial Officer (CFO).
Answer:
1. Accounting
2. Treasury
3. Credit
4. Legal
5. Capital Budgeting
6. and Investor Relations
Question 11: 4 Main forms of business organizations.
Answer: Proprietorship (in terms of numbers most businesses are this), partnerships, corporations (80% are
this), limited liability companies (LLCs) and Limited Liability partnerships
Question 12: Proprietorship.
Answer: An unincorporated business owned by one individual
Question 13: Partnership.
Answer: An unincorporated business owned by two or more persons
Question 14: Corporation.
Answer:
1. A legal entity created by a state
2. separate and distinct from its owners and managers
3. having unlimited life
4. easy transferability of ownership
5. and limited liability
Question 15: S corporations.
Answer: A special designation that allows small businesses that meet qualifications to be taxed as if they
were a proprietorship or a partnership rather than a corporation
Question 16: S Corporation.
Answer: A small corporation that, under Subchapter S of the Internal Revenue Code, elects to be taxed as a
partnership yet retains limited liability and other benefits of the corporate form of organization
Question 17: Limited Liability Company (LLC).
Answer: A popular type of organization that is a hybrid between a partnership and a corporation
Page 2
Questions with Correct Answers (Grade A+)
Question 1: Financial management.
Answer: aka corporate finance, focuses on decisions relating to how much and what types of assets to
acquire, how to raise the capital needed to purchase assets, and how to run the firm so as to maximize its
value.
Question 2: Capital markets.
Answer: relate to the markets where interest rates, along with stocks and bond prices are determined
Question 3: Investments.
Answer: relate to decisions concerning stocks and bonds
Question 4: Security analysis.
Answer: deals with finding the proper values of individual securities (ie stocks & bonds)
Question 5: Portfolio theory.
Answer: This theory deals with the best way to structure portfolios, or "baskets", of stocks and bonds
Question 6: Market analysis.
Answer: A type of analysis which deals with the issue of whether stock and bond markets at any given time
are "too low" or "about right"
Question 7: Behavioral finance.
Answer: (part of market analysis) is where investor psycology is examined in an effort to determine if stock
prices have been bid up to unreasonable heights in a speculative bubble or driven down to unreasonable
lows in a fit of irrational pessimism
Question 8: Sarbanes-Oxley Act.
Answer: A law passed by Congress that requires the CEO and CFO to certify that their firm's financial
statements are accurate
Question 9: Chief Operating Officer (COO).
Answer: Marketing, Production, Human Resources, and other Operating Departments
Page 1
, Question 10: Chief Financial Officer (CFO).
Answer:
1. Accounting
2. Treasury
3. Credit
4. Legal
5. Capital Budgeting
6. and Investor Relations
Question 11: 4 Main forms of business organizations.
Answer: Proprietorship (in terms of numbers most businesses are this), partnerships, corporations (80% are
this), limited liability companies (LLCs) and Limited Liability partnerships
Question 12: Proprietorship.
Answer: An unincorporated business owned by one individual
Question 13: Partnership.
Answer: An unincorporated business owned by two or more persons
Question 14: Corporation.
Answer:
1. A legal entity created by a state
2. separate and distinct from its owners and managers
3. having unlimited life
4. easy transferability of ownership
5. and limited liability
Question 15: S corporations.
Answer: A special designation that allows small businesses that meet qualifications to be taxed as if they
were a proprietorship or a partnership rather than a corporation
Question 16: S Corporation.
Answer: A small corporation that, under Subchapter S of the Internal Revenue Code, elects to be taxed as a
partnership yet retains limited liability and other benefits of the corporate form of organization
Question 17: Limited Liability Company (LLC).
Answer: A popular type of organization that is a hybrid between a partnership and a corporation
Page 2
