Managerial Finance
Final Exam Questions
Course Introduction
Managerial Finance introduces students to the core concepts and analytical tools necessary to make informed financial decisions within business organizations. The course covers topics such as financial statement analysis, capital budgeting, risk and return assessment, working capital management, and financial planning. Emphasis is placed on understanding how managers utilize financial information to evaluate investments, optimize funding strategies, and maximize firm value. Through real-world case studies and problem-solving exercises, students develop practical skills for analyzing financial data and making strategic financial decisions in a managerial context.
Recommended Textbook
Introduction to Finance Markets Investments and Financial Management 15th Edition by Ronald
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18 Chapters
2654 Verified Questions
2654 Flashcards
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Page 2
Chapter 1: The Financial Environment
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Sample Questions
Q1) Personal finance is the study of how individuals prepare for financial emergencies, protect against premature death and property losses, and accumulate wealth.
A)True
B)False
Answer: True
Q2) Money markets are the markets where generally short-term assets are traded.
A)True
B)False Answer: True
Q3) Business finance is the study of financial planning, asset management and fund raising by businesses and financial institutions.
A)True
B)False Answer: True
Q4) Individuals and businesses hold money for purchases or payments they expect to make in the near future.
A)True
B)False Answer: True
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Chapter 2: Money and the Monetary System
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) If the money supply for an economy is $3 trillion and the velocity of money is 4.5, then GDP is:
A) $0.67 trillion
B) $1.5 trillion
C) $7.5 trillion
D) $13.5 trillion
Answer: D
Q2) Which of the following statements is most correct?
A)Both gold and silver have now been completely removed from any monetary role in the U.S.economy.
B)Savings deposits and small time deposits at depository institutions constitute part of the M1 money supply definition.
C)Fiat money is gold coins issued by central banks under authority of the government.
D)The monetary system of the United States today is based on a dollar standard, and the dollar can be converted into gold.
Answer: A
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Chapter 3: Banks and Other Financial Institutions
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Sample Questions
Q1) Financial institutions include:
A)banks
B)pension funds
C)insurance companies
D)all of the above
Answer: D
Q2) Insurance companies sell shares in their firms to individuals and invest the pooled proceeds in corporate and government securities.
A)True
B)False
Answer: False
Q3) The adequacy of capital for commercial banks as measured by regulatory authorities is:
A)a composite of various asset risk categories
B)a measure of investment success
C)based on the total amount of deposits of a bank
D)based on the ratio of federal government obligations to deposits
Answer: A
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5
Chapter 4: Federal Reserve System
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Sample Questions
Q1) The Federal Reserve System consists of all of the following components EXCEPT:
A)Monetary Policy Committee
B)Board of Governors
C)Federal Open Market Committee
D)all of the above
Q2) The National Banking Acts of 1863 and 1864 were:
A)totally eliminated under the Federal Reserve Act of 1913
B)were modified to permit greater flexibility of operations under the Federal Reserve Act of 1913
C)were unaffected by the Federal Reserve Act of 1913
D)none of the above
Q3) By exercising its influence on the monetary system of the United States, the Fed performs a unique and important function: promoting economic stability.
A)True
B)False
Q4) Discount policy is still a major instrument of monetary policy.
A)True
B)False
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Chapter 5: Policy Makers and the Money Supply
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Sample Questions
Q1) The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.
A)True
B)False
Q2) Automatic stabilizers include trade deficits, budget deficits, and floating exchange rates.
A)True
B)False
Q3) The monetary base:
A)equals the money supply
B)consists of checkable and noncheckable deposits
C)consists of bank reserves, plus currency
D)equals the money multiplier, plus bank reserves
Q4) Tax receipts tend to increase during economic downturns.
A)True
B)False
Q5) Nations that export more than they import will have a trade deficit.
A)True
B)False
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Chapter 6: International Finance and Trade
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Sample Questions
Q1) The Export-Import Bank:
A)makes loans and offers guarantees to foreign exporters to the United States
B)may offer emergency credits to assist other countries to maintain their level of exports to the United States
C)makes loans or offers guarantees when the soundness of the transaction is in doubt
D)makes loans to domestic exporters to encourage foreign trade
E)none of the above
Q2) Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.
A)True
B)False
Q3) The 1992 1991 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union. Book says 1991.
A)True B)False
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Page 8
Chapter 7: Savings and Investment Process
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Sample Questions
Q1) Direct securities:
A)are contracts between savers and institutions
B)are contracts between savers and borrowers
C)represent the financial asset of the borrower and the claim on the saver
D)represent the claim on the institution
Q2) All of the following encouraged individuals to enter into risky mortgages during the 2000's EXCEPT:
A)Financial institution lenders
B)Local government officials
C)Government-supported agencies
D)Mortgage originators
E)Federal government officials
Q3) Gross private domestic investment (GPDI) measures fixed investment in residential and nonresidential structures, producers' durable equipment, and changes in business inventories.
A)True
B)False
Q4) The largest proportion of government revenue comes from corporate income taxes. A)True
B)False
Page 9
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Chapter 8: Interest Rates
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Sample Questions
Q1) Compensation for those financial debt instruments that cannot be easily converted to cash at prices close to estimated fair market values is termed:
A)liquidity premium
B)market risk premium
C)maturity premium
D)none of the above
Q2) Which of the following is not true of Treasury bonds?
A)long-lived
B)noncallable
C)stated interest rate
D)all the above are false
Q3) Price inflation has been characteristic of:
A)modern industrial society
B)our post gold-standard period
C)the history of prices since earliest recorded history
D)only modern industrialized societies
Q4) The demand for loanable funds comes from all sectors of the economy.
A)True
B)False
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Chapter 9: Time Value of Money
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Sample Questions
Q1) Simple interest is interest earned on the investment's principal and subsequently-earned interest.
A)True
B)False
Q2) The interest rate determined by multiplying the interest rate charged per period by the number of periods in a year is called the:
A)annual percentage rate
B)compound rate of interest
C)stated rate of interest
D)effective annual rate
Q3) Daniel deposits $2,000 per year at the end of the year for the next 15 years into an IRA account that currently pays 7%.How much will Daniel have on deposit at the end of the 15 years?
A)$39,981
B)$46,753
C)$49,002
D)$50,258
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Chapter 10: Bonds and Stocks: Characteristics and Valuation
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Sample Questions
Q1) If a bond with a par value of $500 and a call premium of 6% is called in before its maturity date, the firm would have to remitpay the following to the bondholders:
A)$500
B)$530
C)$0
D)none of the above
Q2) According to Standard & Poors and Fitch, bonds rated ______ and below are considered to be speculative or "junk."
A)BBB+
B)BB+
C)B+
D)CCC
Q3) A bond that allows investors to force the issuer to redeem the bond prior to maturity is called a:
A)convertible bond
B)callable bond
C)debenture bond
D)putable bond
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Chapter 11: Securities Markets
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Sample Questions
Q1) Over-the-counter (OTC) trades must take place:
A)on the floor of the New York Stock Exchange
B)on the floor of the American Stock Exchange
C)on the floor of the NASDAQ Stock Exchange
D)none of the above
Q2) All of the following are considered futures exchanges EXCEPT:
A)the Chicago Board of Trade (CBOT)
B)The Chicago Mercantile Exchange (CME)
C)the Commodity Exchange (COMEX)
D)all of the above
E)none of the above
Q3) ___________________ are comprised of direct costs, the spread, and underpricing.
A)Commission costs
B)Flotation costs
C)Brokerage commissions
D)none of the above
Q4) The aftermarket is the marketa period of time after an IPO.where securities are subsequently bought and sold after they are initially issued.
A)True
B)False
13
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Chapter 12: Financial Return and Risk Concepts
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Sample Questions
Q1) Which of the following statements is most correct?
A)An efficient portfolio maximizes return for a given level of risk, or minimizes risk for a given level of return.
B)A collection of assets is called a portfolio
C)The goal of an efficient portfolio is to minimize risk for a given level of return.
D)Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk.
E)all of the above
Q2) The greatest level of risk reduction through diversification can be achieved when combining two securities whose returns are perfectly negatively correlated.
A)True
B)False
Q3) A weak-form efficient market is one in which prices reflect all public and private knowledge, including past and current information.
A)True
B)False
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Chapter 13: Business Organization and Financial Data
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Sample Questions
Q1) Limited partners face liability limited to their investment in the firm, but they can participate in the operations of the firm.
A)True
B)False
Q2) The Sarbanes-Oxley Act of 2002 was passed by the U.S.Congress in response several political ethical scandals.
A)True
B)False
Q3) Generally accepted accounting principles are formulated by the:
A)Securities and Exchange Commission
B)Financial Accounting Standards Board
C)Federal Trade Commission
D)General Accounting Office
Q4) On the income statement, gross profit is defined as: Similar to 67 and 68
A)operating profits minus operating expenses
B)gross profit minus cost of goods sold
C)sales revenue minus cost of goods sold
D)sales revenue minus operating expenses
E)none of the above
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Chapter 14: Financial Analysis and Long-Term Financial Planning
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Sample Questions
Q1) A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have
A)excessive current assets.
B)excessive inventory.
C)excessive accounts receivable.
D)excessive debt.
E)none of the above
Q2) The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000 and inventory of $100,000 is:
A)1:1
B)2:1
C)3:1
D)4:1
Q3) A cross-sectional analysis would be used to evaluate a firm's performance over time.
A)True
B)False
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Page 16
Chapter 15: Managing Working Capital
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Sample Questions
Q1) The current ratio concept is particularly useful in: Not in the chapter
A)analyzing large firms
B)comparing the financial positions of firms of varying sizes
C)examining firms with large seasonal sales
D)comparing the financial structures of firms of varying sizes
Q2) BP has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days.Based on this information, BPs cash conversion cycle is ________ days.
A)55
B)65
C)75
D)85
E)none of the above
Q3) A (n) ________ in current assets ________ net working capital, thereby ________ the risk of technical insolvency.
A)decrease; increases; increasing B)decrease; decreases; reducing C)increase; decreases; increasing D)increase; increases; reducing
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Page 17
Chapter 16: Short-Term Business Financing
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Sample Questions
Q1) In general, a firm that secures a bank line of credit pays interest on:
A)the full line of credit.
B)only half of the amount actually borrowed.
C)on the unused portion of the line of credit.
D)on the amount borrowed as well as on the unused portion of the line of credit.
E)none of the above
Q2) If a company can stretch its accounts payable without damaging its credit rating, it is effectively ___________ the cost of foregoing the cash discount.
A)increasing
B)reducing
C)not affecting
D)not able to determine.
E)none of the above
Q3) Spontaneous financing refers to:
A)financing provided by accounts payable and accrued liabilities
B)line of credit agreements
C)revolving credit agreements
D)none of the above
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18
Chapter 17: Capital Budgeting Analysis
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Sample Questions
Q1) A firm's cost of capital is the discount rate used in the evaluation of capital budgeting projects using payback and IRR.
A)True
B)False
Q2) Which of the following statements is correct?
A)Capital budgeting is the process of identifying, evaluating, and implementing a firm's investment opportunities.
B)Capital budgeting seeks to identify projects that will reduce a firm's competitive advantage and by so doing decrease shareholders' wealth.
C)By its nature, capital budgeting involves short-term projects.
D)Capital budgeting projects usually require small initial investments and may involve acquiring or constructing plant and equipment.
E)none of the above statements are correct
Q3) The after-tax cash flows without the project are referred to as:
A)the net investment
B)incremental cash flows
C)the base case
D)none of the above
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19
Chapter 18: Capital Structure and the Cost of Capital
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Sample Questions
Q1) A decrease in the debt ratio will normally have no effect on:
A)financial risk
B)business risk
C)total risk
D)systematic risk
Q2) Business risk is measured by the degree of financial leverage.
A)True
B)False
Q3) Using the constant dividend growth model, which of the following components not be considered?
A)current stock price
B)dividend growth rate
C)risk-free rate
D)all the above are considered in the constant dividend growth model
Q4) Which of the following is a different concept from the other three?
A)required rate of return
B)cost of capital
C)discount rate
D)net profit margin
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