S1. Principles of Finance

What is the most popular precious metal to invest in?

• Gold

• Silver

• Money

• Platinum

Bonds are essentially

• a share of ownership in a company

• a loan to a company

• neither of the above

• both of the above

In general, investments that are riskier tend to provide higher returns over time than investments with less risk

• True

• False

The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

• True

• False

Which one of the following is a disadvantage of selling new common shares?

• the additional capital raised

• a lower overall level of firm risk

• a possible reduction in earnings per share

• the ability to borrow additional funds

What is the compensation for the burden of losing investment opportunities?

• supply

• demand

• interest

• credit

If a company files for bankruptcy, which of the following securities is most at risk of becoming virtually worthless?

• The company’s preferred stock

• The company’s common stock

• The company’s bonds

• The company’s loan

Short-term borrowing is more expensive because it is riskier to the borrower.

• True

• False

Business owners can limit their personal liability by forming a

• general partnership

• sole proprietorship

• partnership with only limited partners

• corporation

What the basic goal of a firm is?

• maximize the wealth of the firm’s owners

• maximize the revenue of the firm

• maximize the profit of the firm

• minimize production's cost