Test Bank for Finance Applications and Theory 6e Cornett Chapter 1-20 Answers are at the end of Each chapter Chapter 1 Student name:__________ 1) Which statements(s) is/are true for successful application of financial theories? A) The economy will be more productive. B) Individual ’s wealth will grow. C) The economy will be more productive and individual's wealth will grow. D) None of these choices are correct. 2) 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) taxes C) dividends 3) This subarea of finance involves me thods 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) investments C) financial management 4) This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings. A) investments B) financial management C) financial institutions and markets NURSEDOCS 5) Financial management involves decisions about which of the following? A) Which pro jects to fund B) How to minimize taxation C) What type of capital should be raised D) All of these choices are correct. 6) This subarea of finance helps facilitate the capital flows between investors and companies. A) investments B) financial management C) treasury management D) financial institutions and markets 7) This subarea of finance is important for adapting to the global economy. A) investments B) financial management C) international finance D) financial institutions and markets 8) 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) options. B) standard deviation. C) coefficient of variation. D) risk. 9) This is a term to describe non -physical assets like stocks and bonds that get their value from future cash flows. A) investment B) financial asset C) real asset D) financial markets NURSEDOCS 10) 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) investments B) asset classes C) market instruments D) financial markets 11) The most commonly accepted groups of asset classes include all of the following except A) stocks. B) bonds. C) machinery and equipment. D) real estate. 12) The ___ ______ is the interest rate at which banks and other depository institutions lend reserve balances to one another overnight; this rate heavily influences other short -term rates. A) average tax rate B) exchange rate C) federal funds rate D) none of these choices are co rrect. 13) Which of the following statements regarding quantitative easing (QE) are true? A) QE is a monetary policy designed to increase the money supply in the economy through buying securities in the market and lowering short -term interest rates. B) The first r ound of QE involved the Fed to purchase potentially toxic mortgage -backed securities from banks. C) During early 2020 due to the COVID -19 pandemic, the Fed dropped the federal funds rate to 1.25% and then again 0.25 a few months later. D) All of these choices ar e correct. 14) Which of the following is the firm's highest -level financial manager? A) chief executive officer B) chief financial officer C) board of directors D) corporate governance NURSEDOCS 15) Which of the following managers would NOT use finance primarily? A) operational managers B) marketing managers C) human resource managers D) all of these choices are correct. 16) Which of the following personal decisions is impacted by finance? A) borrowing money to purchase cars or homes B) making credit card payments C) making retirement decisions D) all of these choices are correct. 17) When determining a form of business organization, all of the following are considered EXCEPT A) who owns the firm. B) the owners' risks. C) the tax ramifications. D) the physical location of the business. 18) This type of business organiz ation is relatively easy to start, and it is subject to much lighter regulatory and paperwork burden than other business forms. A) sole proprietorship B) partnership C) corporation D) hybrid organization 19) This type of business organization is entirely legally independent from its owners. A) sole proprietorship B) partnership C) public corporations D) hybrid organizations NURSEDOCS
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