(Test Bank) Introduction to Finance Markets, Investments, and Financial Management

Melicher,Norton, 17

Business

Test Bank

17th Edition

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Test Bank for Introduction to Finance Markets, Investments, and Financial Management, The downloadable file consists of 660 pages, and the total size of the file is 2.35 MB. Purchase now only for highly discounted price.

Author(s): Melicher, Norton

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Test Bank for Introduction to Finance Markets, Investments, and Financial Management, 17e Ronald Melicher, Edgar Norton (All Chapters) Chapter 1 The Financial Environment TRUE -FALSE QUESTIONS 1. Finance is the study of how individuals, institutions, and businesses acquire, spend and manage money and other financial resources. Answer: T Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 2. Financial management is the study of financial planning, asset management and fund raising by businesses and financial institutions. Answer: T Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 3. Personal finance is the study of how growth -driven performance -focused, early -stage firms raise financial capital and manage operations and assets. Answer: F Difficulty Level: Easy Subject Heading: Two Themes L.O. 1.1 4. Personal finance is the study of how individuals prepare for financial emergencies, protect against premature death and property losses, and accumulate wealth. Answer: T Difficulty Level: Easy Subject Heading: Two Themes L.O. 1.1 5. Financial markets provide the mechanism for allocating financial resources or funds from savers to borrowers. Answer: T Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 6. The financial environment is organizations or intermediaries that help the financial system operate efficien tly and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds in physical assets (inventories, buildings, and equipment). Answer: F Difficulty Level: Easy Subject Heading: What is Finan ce? L.O. 1.1 7. The primary goal of the financial manager in a profit -seeking organization is to maximize the owners’ wealth. Answer: T Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 8. Financial environment is the country or countries being studied. Answer: F Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 9. The terms financial system, institutions, and intermediaries are all interchangeable. Answer: T Difficulty Level: Easy Subject Heading: What is Finance ? L.O. 1.1 10. Most of the impetus for growth in the U.S. economy comes from large companies. Answer: F Difficulty Level: Easy Subject Heading: Small Business Practice L.O. 1.2 11. While the financial press chooses to highlight examples of unethical behavior, most individuals exhibit sound ethical behavior in their personal and business dealings and practices. Answer: T Difficulty Level: Easy Subject Heading: Reputation Matters L.O. 1.3 12. The six principles of finance include (1) Money has a time value, (2) Higher returns are expected for taking on more risk, (3) Diversification of investments can reduce risk, (4) Financial markets are efficient in pricing securities, (5) Manager and stockholder objectives may differ, and (6) Reputation matters. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 13. The principle of finance that "money has a time value" implies Money in hand today is worth less than the promise of receiving the same amount in the futur e because a sum of money today could be invested and grow over time. Answer: F Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 14. Receiving one dollar today has the same value as receiving one dollar in one year. Answer: F Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 15. The principle of finance that "lower returns are expected for taking on less risk" implies that rational investors would choose a risky investment only if they feel the expected return is high enough to justify the greater risk. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 16. The riskier the investment, the lower the return. Answer: F Difficulty Level: Easy Subject Heading: Six Principles of Finance L.O. 1.3 17. The principle of finance that "financial markets are efficient in pricing securities" implies that the prices of securities reflect some information available to the public and that when new information becomes avai lable, prices change over time to reflect that information. Answer: F Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 18. All investment risk is not the same. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 19. Some risk can be removed by investing in several different assets or securities. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 20. The principle of finance that "management objec tives may differ from owner objectives" implies that owner returns may suffer as a result of manager objectives. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 21. Markets have informational efficiency. Answer: T Difficulty Level: Easy Subject Heading: Six Principles of Finance L.O. 1.3 22. The principle of finance that "management objectives may differ from owner objectives" can be resolved by increasing manager salaries. Answer: F Difficulty Level: Med ium Subject Heading: Six Principles of Finance L.O. 1.3 23. The principle of finance that "reputation matters" implies that for institutions or businesses to be successful, they must have the trust and confidence of their customers, employees, and owners, as well as the community and society within which they operate. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 24. The principle of finance that "reputation matters" sometimes is harmed by the different objectiv es of owners and managers. Answer: T Difficulty Level: Medium Subject Heading: Six Principles of Finance L.O. 1.3 25. The U.S. Treasury Department is primarily responsible for the amount of money that is created in the U.S. economy. Answer: F Difficulty Level: Easy Subject Heading: Overview of the Financial System L.O. 1.4 26. In the United States, the central bank is the Federal Reserve System. Answer: T Difficulty Level: Easy Subject Heading: Overview of the Financial System L.O. 1.4 27. Financial system functions include accumulating savings and lending funds. Answer: T Difficulty Level: Easy Subject Heading: Overv iew of the Financial System L.O. 1.4 28. Three financial system components are the U.S. Treasury, financial institutions, and financial markets. Answer: F Difficulty Level: Easy Subject Heading: Overview of the Financial System L.O. 1.4 29. Individuals and businesses hold money for purchases or payments they expect to make in the near future. Answer: T Difficulty Level: Easy Subject Heading: Transferring Money L.O. 1.4 30. One of the most significant functions of the financial system is the creation of money, which serves as a medium of exchange. Answer: T Difficulty Level: Medium Subject Heading: Financial System L.O. 1.4 31. An effective financial system is a complex mix of government and policy makers, a monetary system, financial ins titutions, and financial markets that interact to expedite the flow of financial capital from savings into investment. Answer: T Difficulty Level: Medium Subject Heading: Financial System L.O. 1.4 32. The role of the monetary system is to print and circulate currency. Answer: F Difficulty Level: Medium Subject Heading: Figure 1.2 L.O. 1.4 33. The role of financial markets is to market and facilitate the transfer of financial assets. Answer: T Difficulty Level: Medium Subject Heading: Figure 1.2 L.O. 1.4 34. The secondary securities markets are involved in creating and issuing new securities, mortgages, and other claims to wealth. Answer: F Difficulty Level: Easy Subject Heading: Financial Markets: Characteristics and Types L.O. 1.5 35. Money market s are the markets where generally short -term assets are traded. Answer: T Difficulty Level: Easy Subject Heading: Financial Markets: Characteristics and Types L.O. 1.5 36. Capital markets are markets where equity securities and debt securities with maturities of greater than one year are traded. Answer: T Difficulty Level: Easy Subject Heading: Financial Markets: Characteristics and Types L.O. 1.5 37. Money markets are markets where equity securities and debt securities with maturities of greater than one year are traded. Answer: F Difficulty Level: Easy Subject Heading: Financial Markets: Characteristics and Types L.O. 1.5 38. Because the relative values of currencies may change, firms cannot use the currency exchange markets to reduce t he risk of holding too much of certain currencies. Answer: F Difficulty Level: Easy Subject Heading: Major Types of Financial Markets L.O. 1.5 39. Money markets are where debt securities with maturities of one year or more are issued and traded. Answer: F Difficulty Level: Medium Subject Heading: Money and Capital Markets L.O. 1.5 40. Derivative securities may be used to speculate on the future price direction of the underlying financial assets or to reduce price risk associated with holding the underlying financial assets. Answer: T Difficulty Level: Medium Subject Heading: Financial Markets: Characteristics and Types L.O. 1.5 41. The bond markets are where money market securities, bonds, and mortgages are originated and traded. Answer: F Difficulty Level: Hard Subject Heading: Major Types of Financial Markets L.O. 1.5 42. Larger businesses or corporations divide their finance activities into treasury and monitoring functions, whereas smaller firms often combine these functions. Answer: F Difficulty Level: Hard Subject Heading: Careers in Finance L.O. 1.6 MULTIPLE -CHOICE QUESTIONS 43. Finance has its origins in: a. economics and statistics b. accounting and sociology c. accounting and economics d. psychology and mathematics Answer: c Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 44. An area of finance that involves the sale or marketing of securities, the analysis of securities, and the management of investment risk through portfolio di versification is referred to as a. financial management b. investments c. financial institutions d. Financial Markets: Characteristics and Types Answer: b Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 45. Intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds are known as: a. banks b. financial institutions c. securities markets d. government or ganizations Answer: b Difficulty Level: Easy Subject Heading: What is Finance? L.O. 1.1 46. Finance is: a. the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets b. the study of how businesses acquire, spend, and manage money and other financial assets c. the study of how governments, and businesses acquire, spend, and manage money and other financial assets d. the study of how money is used to purchase goods and services Answer: a Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 47. The financial environment: a. encompasses the financial markets and global interactions that contribute to an efficiently operating economy. b. encompasses the financial ins titutions and financial markets that contribute to an efficiently operating economy. c. encompasses the financial system, financial institutions, financial markets, business firms, individuals, and global interactions that contribute to an efficiently operating economy. d. encompasses the trade in goods and services by financial instruments. Answer: c Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 48. Economists use a ___________________ framework to explain how the prices and quantiti es of goods and services are determined in a free -market economic system. a. opportunity b. marginal cost c. supply -and-demand d. anti-monopoly Answer: C Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 49. An area of finance that involves the study of organizations or intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds in physical assets (inv entories, buildings, and equipment) is called: a. financial management b. investments c. financial institutions d. banks Answer: c Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 50. Successful businesses typically progress through a series of life -cycle stages —from the idea stage to exiting the business; these five stages include the: a. development stage, startup stage, survival stage, rapid growth stage, and maturity stage. b. idea stage, design stage, operating stage, rebuilding stage, and decline stage c. development stage, operating stage, rebuilding stage, rapid growth stage, and maturity stage d. idea stage, startup stage, rapid growth stage, survival stage, and decline stage Answer: a Difficulty Level: Mediu m Subject Heading: Business Life Cycle L.O. 1.1 51. This is the financial system, institutions, markets, businesses, individuals, and global interactions that help the economy operate efficiency. a. Financial management b. Investments c. Financial markets d. Financial institutions e. Financial environment Answer: e Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 52. This is the intermediaries that help the financial system operate efficiently and transfer funds from savers to individuals, businesses, and governments that seek to spend or invest the funds , a. Financial management b. Investments c. Financial markets d. Financial institutions e. Financial environment Answer: d Difficulty Level: Medium Subject Heading: What is Fin ance? L.O. 1.1 53. An effective financial system must have: a. several sets of policy makers who pass laws and make decisions relating to fiscal and monetary policies b. an efficient system for buying goods and services c. gold reserves equal to the a mount of money in circulation d. free trade in financial instruments with foreign nations Answer: a Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 54. This is the locations or electronic forums that facilitate the flow of funds among investors, businesses, and governments . a. Financial management b. Investments c. Financial markets d. Financial institutions e. Financial environment Answer: c Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 55. This involves the sale or marketing of securities, the analysis of securities, and the management of investment risk through portfolio diversifi cation . a. Financial management b. Investments c. Financial markets d. Financial institutions e. Financial environmen t Answer: b Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 56. ____________________ provide the record -keeping mechanism for showing ownership of the financial instruments used in the flow of financial funds between savers and borrow ers and record revenues, expenses, and profitability of organizations that produce and exchange goods and services. a. Financial Managers b. Accountants c. Operations Managers d. Statisticians Answer: b Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 57. This involves financial planning, asset management, and fund -raising decisions to enhance the value of businesses . a. Financial management b. Investments c. Financial markets d. Financial institutions e. Financial environment Answer: a Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 58. An area of finance that involves financial planning, asset management and fund -raising decisions to enhance the value of businesses is called: a. financial management b. investments c. financial institutions d. Financial Markets: Characteristics and Types Answer: a Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 59. ___________________ are intermediaries, such as banks, insurance companies, and investment companies that engage in financial activities to aid the flow of funds from savers to borrowers or investors. a. Financial Institutions b. Financial market organizations c. Federal agencies d. International financial org anizations Answer: a Difficulty Level: Medium Subject Heading: What is Finance? L.O. 1.1 60. Which of the following is not a part of the financial environment? a. Institutions and markets b. Investments c. Stocks d. Financial management Answer: c Difficulty Level: Medium Subject Heading: Figure 1.1 L.O. 1.1 61. This is the study of how growth driven, performance focused, early stage firms raise financial capital and manage operations and assets . a. Corporate finance b. Business finance c. Entrepre neurial finance d. Personal finance e. None of the above Answer: c Difficulty Level: Medium Subject Heading: Two Themes L.O. 1.1