Chapter 1 BFM

Based on the cover images, which concept is most likely associated with finance?

• Risk and profit

• Cooking and recipes

• Sports and fitness

• Art and design

Which type of decision involves determining what long-term investments a firm should undertake?

• Capital budgeting decisions

• Capital structure decisions

• Working capital management decisions

• Dividend policy decisions

The three main questions addressed by the study of finance are interconnected in the decision-making process of a firm. Which of the following best explains this interconnection?

• Each question operates independently and does not affect the others.

• The questions are sequential, with capital budgeting decisions leading to capital structure decisions, which then influence working capital management decisions.

• The questions are unrelated to the firm's financial health.

• Only capital budgeting decisions are important for a firm's success.

Why is it beneficial to understand finance decisions made by a company?

• It helps you understand better finance decisions made by the company.

• It allows you to ignore company policies.

• It makes you a better cook.

• It is only important for students.

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

• Sole Proprietorships

• Partnerships

• Corporations

• Franchises

Which of the following is a disadvantage of a sole proprietorship?

• No need to consult others while making decisions

• Taxed at the personal tax rate

• Personally liable for the business debts

• Easy to start

What is a disadvantage of a partnership?

• Relatively easy to start

• Taxed at the personal tax rate

• Partners jointly share unlimited liability

• Access to funds from multiple sources or partners

The relationship between shareholders, the Board of directors, and senior management contributes to the governance of a corporation by:

• Shareholders elect the Board, which appoints senior management, creating a system of oversight and accountability.

• Senior management elects the Board, which appoints shareholders, ensuring direct control.

• The government appoints all parties, removing shareholder influence.

• Employees elect senior management, who then appoint the Board.

What is one of the main duties of the Controller in a corporation?

• Raising capital

• Cost accounting

• Capital expenditures

• Credit management

What is the primary purpose of financial statements in a business?

• To promote products

• To provide information for decision-making

• To entertain stakeholders

• To comply with tax regulations