Chapter 1 Quiz

What are the four basic areas of finance?

• Investments, Financial planning, Risk management, Corporate finance

• Corporate finance, Marketing, Accounting, Management

• Financial institutions, Personal finance, Taxation, Corporate governance

• Corporate finance, Investments, Financial institutions, International finance

What is the primary goal of financial management?

• Minimize costs

• Maximize profit

• Maximize the current value per share of the company’s existing stock

• Maximize market share

Which of the following is NOT a form of business organization?

• Partnership

• Sole proprietorship

• Limited liability partnership

• Corporation

What is the role of a financial manager?

• To handle customer service

• To answer questions related to capital budgeting, capital structure, working capital management

• To manage human resources

• To oversee marketing strategies

What is capital budgeting concerned with?

• Setting up a business structure

• Managing day-to-day finances

• Determining long-term investments

• Calculating tax obligations

Which of the following is an advantage of a corporation?

• Single taxation

• Limited life

• Unlimited liability

• Easier to raise capital

What is the agency problem?

• A method of financial forecasting

• A legal requirement for corporations

• Conflict of interest between stockholders and managers

• A type of investment strategy

What is a disadvantage of a sole proprietorship?

• Easier to transfer ownership

• Unlimited liability

• Limited liability

• Access to more capital

Which of the following best describes a partnership?

• Owned by one person

• Owned by two or more persons

• A legal entity distinct from its owners

• A type of corporation

What is the primary focus of international finance?

• Developing marketing strategies

• Understanding local markets

• Familiarity with exchange rates and political risk

• Managing domestic investments