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TEST BANK for Introduction to Corporate Finance, 4th Canadian Edition by Booth, Cleary and Rakita | All 24 Chapters $32.43
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TEST BANK for Introduction to Corporate Finance, 4th Canadian Edition by Booth, Cleary and Rakita | All 24 Chapters

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TEST BANK for Introduction to Corporate Finance, 4th Canadian Edition by Booth, Cleary and Rakita. ISBN 2214, ISBN 1287. TABLE OF CONTENTS: PART 1: THE FINANCIAL ENVIRONMENT Chapter 1: An Intro duction to Finance Chapter 2: Business (Corporate) Finance PART 2: FINANCIAL ANALYSIS TOOLS Chapter 3: Fi...

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  • July 16, 2023
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  • 2022/2023
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CHAPTER 1: AN INTRODUCTION TO FINANCE
MULTIPLE CHOICE QUESTIONS

1. Finance is the study of how and under what terms
a) savings are allocated between lenders and borrowers.
b) investments are allocated between investors and brokers.
c) institutions with excess money make share purchase decisions.
d) households allocate money between spending and saving.

Answer: a

Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined


2. A financial security is
a) a jail term for a financial manager that has committed fraud.
b) a contract that is created only when a new stock is issued to the public.
c) a financial contract created whenever funds are transferred.
d) a contract that is created only when a new bond is first sold.

Answer: c

Type: Definition
Difficulty: Easy
Learning Objective: Define finance and explain what is involved in the study of finance.
Section Reference: Finance Defined


3. Which of the following does NOT appear as an item on Canada’s balance sheet, as presented
in the text?
a) non-residential structures
b) net worth or equity
c) net foreign liabilities
d) net foreign assets

Answer: d

Type: Definition
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets


4. Human capital is
a) based on only the current skills, but not the education, of a country’s citizens.
b) based on only the education, but not the current skills, of a country’s citizens.
c) based on the skills and capital of citizens and should be included in a country’s wealth.

,1-3 Test Bank for Introduction to Corporate Finance, Fourth Canadian Edition


d) difficult to measure and should therefore not be included in a country’s wealth.

Answer: c

Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets


5. Which of the following items is NOT a real asset?
a) land
b) television
c) bond
d) gold mine

Answer: c

Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets


6. In the following list, which item is a financial asset?
a) land
b) bond
c) building
d) inventory

Answer: b

Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets


7. What is the main difference between real assets and financial assets?
a) Real assets are tangible and financial assets are intangible.
b) Real assets have known values, while the values of financial assets are not known.
c) Real assets are intangible and financial assets are tangible.
d) Real assets have unknown values, while the values of financial assets are known.

Answer: a

Type: Definition
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets

, An Introduction to Finance 1-4




8. If Canadian households, in aggregate, own real assets with a market value of $3.194 trillion,
and also own net financial assets with a market value of $2.344 trillion, the total net assets of
Canadian households have a market value of
a) $3.194 trillion
b) $5.538 trillion
c) $–0.850 trillion
d) $0.850 trillion

Answer: b

Type: Calculation
Difficulty: Easy
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $5.538 = $3.194 + $2.344


9. Given the following hypothetical information regarding the real and financial assets in Canada
for 2015 (numbers in $ billions):

Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344

What is the value of the total net assets in Canada for 2015?
a) $5,842 billion
b) $6,086 billion
c) $6,124 billion
d) $6,105 billion

Answer: c

Type: Calculation
Difficulty: Medium
Learning Objective: List the major financial and real assets held by Canadians.
Section Reference: Real versus Financial Assets
Feedback: $6,124 = $677 + $2,202 + $3,194 – $658 – $1,635 + $2,344


10. You are provided with the following hypothetical information regarding the real and financial
assets in Canada for 2015 (numbers in $ billions):

Real Assets Net Financial Assets
Government 677 –658
Business 2,202 –1,635
Households 3,194 2,344

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