FIN 370T Wk 1 – Practice: Ch. 1 and 3 Knowledge Check

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FIN 370T Wk 1 – Practice: Ch. 1 and 3 Knowledge Check

A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called

Multiple Choice

•      options.
•      standard deviation.
•      coefficient of variation.
•      risk.

This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings.

Multiple Choice

•      investments
•      financial management
•      treasury management

Which of these must effectively distribute capital between investors and companies?

Multiple Choice

•      individuals
•      international investors
•      companies
•      financial institutions

Which of the following can use financial concepts to improve their decisions?

Multiple Choice

•      financial professionals only
•      financial and nonfinance professionals
•      day-to-day operations managers only
•      long-term operations managers only

Which of the following do not ensure firm viability over the long run?

Multiple Choice

•      maximizing employment
•      market share
•      profits
•      all of these choices are .

The most common type of business in the United States is the

Multiple Choice

•      corporation.
•      partnership.
•      sole proprietorship.
•      hybrid organization such as a limited liability company.

Which of these does NOT act as a monitor of how the firm is being run outside the firm?

Multiple Choice

•      auditors
•      analysts
•      credit rating agencies
•      members of the board of directors

For corporations, maximizing the value of owner's equity can also be stated as

Multiple Choice

•      maximizing retained earnings.
•      maximizing earnings per share.
•      maximizing net income.
•      maximizing the stock price.

Corporate stakeholders include all of the following EXCEPT

Multiple Choice

•      employees.
•      shareholders.
•      suppliers.
•      auditors.

Which of the following statements is ?

Multiple Choice

•      Sole proprietorships are easy to start.
•      If the sole proprietorship gets sued, the owner is not liable.
•      It is relatively easy for sole proprietorships to raise money.
•      Profits from the sole proprietorship are subject to double taxation.

The biggest disadvantage of the sole proprietorship is

Multiple Choice

•      unlimited liability.
•      double taxation.
•      limited access to capital.
•      total control.

Which of the following is not an impact of the slowdown occurring in China’s economy?

Multiple Choice

•      lower demand in materials such as steel, iron ore, and copper
•      real estate market declining in Sydney, Australia
•      money going out of Manhattan, New York
•      falling community prices

You are considering a stock investment in one of two firms (A and B), both of which operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2 million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in equity. Calculate the debt-to-equity ratio for the two firms.

Multiple Choice

•      Firm A: 9 times; Firm B: 1.11 times
•      Firm A: 19 times; Firm B: 0.11 times
•      Firm A: 9 times; Firm B: 0.11 times
•      Firm A: 19 times; Firm B: 1.11 times