Financial Management Quiz

Abusinesscreatedasadistinctlegalentityandtreatedasalegal“person”iscalledat:

• Corporation

• Sole proprietorship

• General partnership

• Limited partnership

• Unlimited liability company

Which one of the following is a capital structure decision?

• Determining which one of two projects to accept

• Determining how to allocate investment funds to multiple projects

• Determining the amount of funds needed to finance customer purchases of a new product

• Determining how much debt should be assumed to fund a project

• Determining how much inventory will be needed to support a project

Which one of the following best states the primary goal of financial management?

• Maximize current dividends per share

• Maximize the current value per share

• Increase cash flow and avoid financial distress

• Minimize operational costs while maximizing firm efficiency

• Maintain steady growth while increasing current profits

Which one of the following is included in a firm’s market value but yet is excluded from the firm’s accounting value?

• Real estate investment

• Good reputation of the company

• Equipment owned by the firm

• Money due from a customer

• An item held by the firm for future sale

Which one of these is most apt to be a fixed cost?

• Raw materials

• Manufacturing wages

• Management bonuses

• Office salaries

• Shipping and freight

Stevejustcomputedthepresentvalueof$10,000bonushewillreceivedinthefuture.The interestrateheusedinthisprocessisreferredtoaswhichoneofthefollowing?

• Current yield

• Effective rate

• Compound rate

• Simple rate

• Discount rate

Realratearedefinedasnominalratesthathavebeenadjustedforwhichofthefollowing?

• Inflation

• Default risk

• Accrued interest

• Interest rate risk

• Both inflation and interest rate risk

The cash flow of a firm which is available for distribution to the firm’s creditors and stockholders is called the:

• Operating cash flow

• Net capital spending

• Networking capital

• Cash flow from assets

• Cash flow to stockholders

Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate two years from now. What happens to the present value of this gift if you delay your graduation by one year and graduate three years from now?

• Remains constant

• Increases

• Becomes negative

• Cannot be determined from the information provided

• Decreases

Which one of the following terms is defined as the management of a firm’s long term investment?

• Working capital management

• Financial allocation

• Agency cost analysis

• Capital budgeting

• Capital structure