Chapter 03
Analyzing Financial Statements
Multiple Choice Questions
1. Which of the following refer to ratios that measure the relationship between a firm's liquid (or current) assets and its current liabilities?
A. Cross-section
B. Internal growth
C. Liquidity
D. Mar...
1. In the financial crisis that started in 2006, a significant indicator of the U.S. economic
decline was:
A. a significant drop in interest
rates.
B. a sharp increase in unregulated Ponzi-type
security sales.
C. rising defaults by subprime mortgage
borrowers.
D. a large increase in loan default due to
unemployment.
2. The financial crisis that started in 2006 was magnified by which of the following?
A. Public concern over the war in
Afghanistan
B. Consistently increasing oil and gas
prices
C. Ethical issues affecting high value
investment
D. Mortgage lenders securitizing large quantities of
their loans
3. Not all cash a company generates will be returned to the investors. Which of the
following will NOT reduce the amount of capital returned to the investors?
A. Retained
earnings
B. Taxe
s
C. Dividen
ds
D. None of these will reduce the amount of capital returned to the
investors.
,4. This subarea of finance involves methods and techniques to make appropriate
decisions about what kinds of securities to own, which firms' securities to buy, and
how to be paid back in the form that the investor wishes.
A. Real
markets
B. Investmen
ts
C. Financial
management
D. None of
these
5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received
from investors or from retained earnings.
A. Investmen
ts
B. Financial
management
C. Treasury
management
D. None of
these
6. Financial management involves decisions about which of the following?
A. Which projects to
fund
B. How to minimize
taxation
C. What type of capital should be
raised
D. All of
these
7. This subarea of finance helps facilitate the capital flows between investors and
companies.
A. Investmen
ts
B. Financial
management
C. Treasury
management
D. Financial institutions and
markets
, 8. This subarea of finance is important for adapting to the global economy.
A. Investmen
ts
B. Financial
management
C. International
finance
D. Financial institutions and
markets
9. 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:
A. option
s.
B. standard
deviation.
C. coefficient of
variation.
D. risk
.
10. This is a general term for securities like stocks, bonds, and other assets that
represent ownership in a cash flow.
A. Investme
nt
B. Financial
asset
C. Real
asset
D. Financial
markets
11. Which of the following is defined as a group of securities that exhibit similar
characteristics, behave similarly in the marketplace, and are subject to the same
laws and regulations?
A. Investmen
ts
B. Asset
classes
C. Market
instruments
D. Financial
markets
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