Introduction to Finance

What is Finance?

• The study of history

• The art and science of managing money

• The process of manufacturing goods

• The study of human behavior

What is the primary goal of financial management?

• Maximizing employee satisfaction

• Maximizing shareholder wealth

• Minimizing customer complaints

• Reducing production costs

Which of the following is NOT a function of financial management?

• Investment decisions

• Financing decisions

• Dividend decisions

• Marketing decisions

What is capital budgeting?

• Managing short-term assets

• Selecting long-term investment projects

• Deciding how much to pay in dividends

• Raising funds from investors

Which business organization is owned by a single person?

• Partnership

• Company

• Sole Proprietorship

• Corporation

In a partnership, what is the liability of a limited liability partner?

• Unlimited liability

• Limited to the amount of capital invested

• No liability

• Shared equally among all partners

What is the agency problem?

• A conflict between shareholders and customers

• A conflict between management and shareholders

• A conflict between employees and management

• A conflict between suppliers and customers

Which of the following is a strategy to mitigate the agency problem?

• Ignoring shareholder concerns

• Encouraging short-term decision-making

• Promoting ethical leadership

• Reducing transparency

What is the primary function of financial markets?

• To manufacture goods

• To allocate financial resources within the economy

• To provide healthcare services

• To manage human resources

Which market deals with newly issued securities?

• Secondary market

• Money market

• Primary market

• Bond market