Quiz
Business Finance - Chapter 1
Questions in this quiz (23)
1What is the Accounting equation?
- AAssets = Liabilities + Owners' Equity
- BLiabilities = Assets + Owners' Equity
2A share of stock in General Motors that your company owns would be
- AA liability
- BOwners' equity
- CAn asset
- DNone of the above
- EAll of the above
3"Shareholder wealth" in a firm is represented by:
- Athe number of people employed in the firm.
- Bthe book value of the firm's assets less the book value of its liabilities.
- Cthe amount of salary paid to its employees.
- Dthe market price per share of the firm's common stock.
4The long-run objective of financial management is to
- Amaximize earnings per share.
- Bmaximize the value of the firm's common stock
- Cmaximize return on investment.
- Dmaximize market share
5What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?
- A$100,000
- B$6.00
- C$0.50
- D$6.50
6A(n) _________ would be an example of a principal, while a(n) _______ would be an example of an agent.
- Ashareholder; manager
- Bmanager; owner
- Caccountant; bondholder
- Dshareholder; bondholder
7The market price of a share of common stock is determined by:
- Athe board of directors of the firm.
- Bthe stock exchange on which the stock is listed.
- Cthe president of the company.
- Dindividuals buying and selling the stock.
8The focal point of financial management in a firm is:
- Athe number and types of products or services provided by the firm.
- Bthe minimization of the amount of taxes paid by the firm.
- Cthe creation of value for shareholders.
- Dthe dollars profits earned by the firm.
9The decision function of financial management can be broken down into the decisions:
- Afinancing and investment
- Binvestment, financing, and asset management
- Cfinancing and dividend
- Dcapital budgeting, cash management, and credit management
10The controller's responsibilities are primarily_______ in nature, while the treasurer's responsibilities are primarily related to _________.
- Aoperational; financial management
- Bfinancial management; accounting
- Caccounting; financial management
- Dfinancial management; operations
11A company's ________ is (are) potentially the most effective instrument of good corporate governance.
- Acommon stock shareholders
- Bboard of directors
- Ctop executive officers
12The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to:
- Aa series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco and numerous others.
- Ba dramatic rise in the Canadian trade deficit.
- Ccharges of excessive compensation to top corporate executives.
- Drising complaints by investors and security analysts over the financial accounting for stock options.
13A company has $1,000,000 Owners' Equity and $75,000 in liabilities. What are the assets for the company?
- A$1,000,000
- B$75,000
- C$925,000
- DNone of the above
14A company has cash in the bank of $850,000, inventory of $50,000 and a building worth $100,000. These are the only assets for the company. The company has liabilities that amount to $925,000. How much is owners' equity in this company?
- A$1,000,000
- B$75,000
- C$925,000
- DNone of the above
15Which of the following is not an asset:
- ARetained earnings
- BA roto-tiller
- CA stapler
- D20 kilos of fertilizer
- EAll of the above
16The idea that Managers should try to provide each stakeholder group of the business with a satisfactory level of return is called:
- ASatisficing
- BCapital Markets
- CAgency Problem
- DCorporate Governance
17Financial market for long-term loans, bonds and debentures, and shares is called:
- ACapital Market
- BMoney Market
- CForex Market
18The conflict of interest between the shareholders (the principals) and the Managers (agents) of a business, which arises when the Managers seek to maximize their own welfare is called:
- AWealth Maximization
- BProfit Maximazation
- CSatisficing
- DThe Agency Problem
19Systems for directing and controlling a business, is called:
- ACorporate Governance
- BFinancial Control
20A statement setting out the purpose for which a business exists, is called:
- AMission Statement
- BBusiness Plan
21The idea that the main purpose of a business is to maximize the wealth of its owners (shareholders). What is it called?
- AWealth Maximization
- BProfit Maximization
22Financial instruments that allow managers and employees to acquire shares in a business at some future date on favourable terms, is called:
- AShare Options
- BLoan
23The formula for calculating "Earnings Per Share (EPS)" is:
- ANet Income / Number of Shares
- BLiabilities + Owners' Equity
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- Description
- Review questions for Chapter 1 of PMC 150A - Business Finance. Question Sources: http://bit.ly/1ddUoba and http://bit.ly/166ourX
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