Principle
of
/
Financial
/
Management
/
Exam 1 Questions With Correct Answers
/ / / / / /
(LO
/1.1)
/What /is /finance? /- /correct /answer(s) /✔✔ /finance /is /the /study /of /how /individuals, /businesses,
/governments /and /institutions /acquire, /manage, /and /spend /financial /resources.
What
/is
/meant
/by
/the
/term
/financial
/environment? /-
/correct
/answer(s)
/✔✔
/The
/financial
/environment
/encompasses
/the
/financial
/system, /institutions, /markets, /and /individuals /that /make /the /economy /operate /efficiently.
,(LO
/1.1)
/What
/are
/the
/three
/areas
/of
/finance? /-
/correct
/answer(s)
/✔✔ /Overlapping /areas /of /the /financial /environment /often /displayed /in /Venn /Diagram
Institutions
/and
/Markets /-
/correct
/answer(s)
/✔✔
/Financial
/Institutions-
/intermediaries
/that /help /the /financial /system /operate /efficiently /and /transfer /funds /from /saver /to /investors.
Financial /Markets: /physical /locations /or /electronic /forums /that /facilitate /the /flow /of /funds
Investments /-
/correct
/answer(s)
/✔✔
/involve
/the
/sale
/or
/marketing
/of
/securities,
,/the
/analysis
/of /securities, /and /the /management /of /investment /risk /through /portfolio /diversification
Financial
/Management /-
/correct /answer(s) /✔✔ /involves /financial /planning, /asset /management, /and /fund-
raising /decisions /to /enhance /the /value /of /businesses
Briefly
/describe
/the
/terms
/entrepreneurial
/finance
/and
/personal
/finance. /-
/correct
/answer(s)
/✔✔
/Entrepreneurial
/Finance-
/the
/study
/of
/how
/performance
/focused /early /stage /firms /raise /financial /capital /and /manage /their /assets /and /operations /
Personal
/Finance-
/the
/study /of /how /individuals /prepare /for /financial /emergencies, /protect /against /premature /death
/and /loss /of /property, /and /accumulate /wealth /over /time.
, Identify
/and
/briefly
/describe
/several
/reasons
/for
/studying
/finance. /- /correct /answer(s) /✔✔ /1. /To /make /informed /economic /and /political /decisions /based
/on /a /basic /understanding /of /financial /roles /and /how /policy /makers /can /influence /them /
2. /To /make /informed /personal /and /business /decisions /
3. /To /make /informed /career /decisions /based /on /a /basic /understanding /of /business /finance
Briefly
/describe
/how
/the
/financial
/environment /has /changed /during /the /past /few /years. /- /correct /answer(s) /✔✔ /The /first /fifteen
/years /of /the /twenty-first /century /has /been /characterized /by /a /volatile /economic /environment
/in /the /U.S. /A /price /bubble /for /technology /stocks /(including /dot.com /start-
ups)
/burst
/in
/2000.
/Economic
/downturn
/was
/made
/worse
/by
/the
/September
/11,
/2001
of
/
Financial
/
Management
/
Exam 1 Questions With Correct Answers
/ / / / / /
(LO
/1.1)
/What /is /finance? /- /correct /answer(s) /✔✔ /finance /is /the /study /of /how /individuals, /businesses,
/governments /and /institutions /acquire, /manage, /and /spend /financial /resources.
What
/is
/meant
/by
/the
/term
/financial
/environment? /-
/correct
/answer(s)
/✔✔
/The
/financial
/environment
/encompasses
/the
/financial
/system, /institutions, /markets, /and /individuals /that /make /the /economy /operate /efficiently.
,(LO
/1.1)
/What
/are
/the
/three
/areas
/of
/finance? /-
/correct
/answer(s)
/✔✔ /Overlapping /areas /of /the /financial /environment /often /displayed /in /Venn /Diagram
Institutions
/and
/Markets /-
/correct
/answer(s)
/✔✔
/Financial
/Institutions-
/intermediaries
/that /help /the /financial /system /operate /efficiently /and /transfer /funds /from /saver /to /investors.
Financial /Markets: /physical /locations /or /electronic /forums /that /facilitate /the /flow /of /funds
Investments /-
/correct
/answer(s)
/✔✔
/involve
/the
/sale
/or
/marketing
/of
/securities,
,/the
/analysis
/of /securities, /and /the /management /of /investment /risk /through /portfolio /diversification
Financial
/Management /-
/correct /answer(s) /✔✔ /involves /financial /planning, /asset /management, /and /fund-
raising /decisions /to /enhance /the /value /of /businesses
Briefly
/describe
/the
/terms
/entrepreneurial
/finance
/and
/personal
/finance. /-
/correct
/answer(s)
/✔✔
/Entrepreneurial
/Finance-
/the
/study
/of
/how
/performance
/focused /early /stage /firms /raise /financial /capital /and /manage /their /assets /and /operations /
Personal
/Finance-
/the
/study /of /how /individuals /prepare /for /financial /emergencies, /protect /against /premature /death
/and /loss /of /property, /and /accumulate /wealth /over /time.
, Identify
/and
/briefly
/describe
/several
/reasons
/for
/studying
/finance. /- /correct /answer(s) /✔✔ /1. /To /make /informed /economic /and /political /decisions /based
/on /a /basic /understanding /of /financial /roles /and /how /policy /makers /can /influence /them /
2. /To /make /informed /personal /and /business /decisions /
3. /To /make /informed /career /decisions /based /on /a /basic /understanding /of /business /finance
Briefly
/describe
/how
/the
/financial
/environment /has /changed /during /the /past /few /years. /- /correct /answer(s) /✔✔ /The /first /fifteen
/years /of /the /twenty-first /century /has /been /characterized /by /a /volatile /economic /environment
/in /the /U.S. /A /price /bubble /for /technology /stocks /(including /dot.com /start-
ups)
/burst
/in
/2000.
/Economic
/downturn
/was
/made
/worse
/by
/the
/September
/11,
/2001
