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Financial Management Principles and Applications by John
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,Financial Management: Principles & Applications, 13e (Titman)Chapter 1 Getting Started-Principles of Finance
1) Which of the following statements best represents what finance is about?
A) How political, social, and economic forces affect corporations
B) Maximizing profits
C) The study of how people and businesses make investment decisions and how to finance those
decisions.
D) Reducing risk
Answer: C
Diff: 1
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
2) From a financial point of view, a company that decides to develop new product is making
A) a financing decision.
B) an investment decision.
C) a capital structure decision.
D) a cash flow decision.
Answer: B
Diff: 1
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
3) Working capital management refers to
A) long-term financing decisions.
B) the management of cash flows.
C) investing in product development.
D) capital structure.
Answer: B
Diff: 2
AACSB: 7. Application of knowledge
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: capital structure
Principles: Principle 3: Cash flows are the source of value
1
Copyright © 2018 Pearson Education, Inc.
,4) Finance managers need to interact constantly with
A) marketing managers.
B) accounting staff.
C) management information systems staff.
D) all of the above.
Answer: D
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
5) The personal decision to take a year off from work to obtain a graduate degree in business is
primarily a(n)________ decision.
A) social
B) financial
C) ethical
D) investment
Answer: D
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Revised
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
6) The area of finance that deals with long-term investment decisions is known as
A) capital structure.
B) working capital management.
C) financial strategy.
D) capital budgeting.
Answer: D
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
2
Copyright © 2018 Pearson Education, Inc.
, 7) Capital structure refers to the financing of long-term investments.
Answer: TRUE
Diff: 1
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
8) Financial decisions can be difficult because the cost of investments can be estimated with
greater confidence than future payoffs.
Answer: TRUE
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
9) What are the three basic questions addressed by the study of investments?
Answer:
1. What investments should the firm undertake?
2. How should the firm fund these investments?
3. How can the firm best manage cash flows in its day to day operations?
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.1 Understand the importance of finance and identify the three primary business
decisions that financial managers make.
Keywords: what is finance?
Principles: Principle 3: Cash flows are the source of value
10) Which of the following is NOT an advantage of the sole proprietorship?
A) Limited liability
B) No time limit imposed on its existence
C) No legal requirements for starting the business
D) None of the above
Answer: A
Diff: 2
AACSB: 6. Reflective thinking
Question Status: Previous edition
Objective: 1.2 Identify the differences between the three major legal forms of business.
Keywords: proprietorships
Principles: Principle 2: There Is a Risk-Return Tradeoff
3
Copyright © 2018 Pearson Education, Inc.
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