Business 50 Multiple Choice Questions Assignment

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Quiz
Note: It is recommended that you save your response as you complete each question.
Question 1 (2 points) Question 1 Unsaved
The traditional goal of financial management has been to maximize the value of the firm to its
owners.
Question 1 options:
True
False
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Question 2 (2 points) Question 2 Unsaved
Finance is the area of business responsible for finding the best sources of funds to acquire for
business operations and then determining the best way to use those funds.
Question 2 options:
True
False
Save
Question 3 (2 points) Question 3 Unsaved
Social responsibility is NOT considered a long-term financial performance concern for financial
managers.
Question 3 options:
True
False
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Question 4 (2 points) Question 4 Unsaved
Thomas is ready to launch his vending truck business, but is in need of start-up financing. The
best funding source for Thomas’ business would be a bank or other established lenders.
Question 4 options:
True

False
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Question 5 (2 points) Question 5 Unsaved
A corporation can raise additional equity financing by taking out a long-term loan from a bank.
Question 5 options:
True
False
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Question 6 (2 points) Question 6 Unsaved
Interest payments on a firm’s debt are a tax-deductible expense.
Question 6 options:
True
False
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Question 7 (2 points) Question 7 Unsaved
CEOs have been accused of many things, especially when the public perceives them as greedy.
When it comes to blending shareholder value with social responsibility, it doesn’t have to be a
case of oil and water, however. Which of the following scenarios best describes how the two
should relate?
Question 7 options:

A chief executive is probably most effective when he is both rock star and quietly hardworking
because if he works hard, the publicity he generates will be a boon for the company.

It’s simple: no matter how much a CEO earns or what his or her perks are, if the company is
profitable and generates sustainable growth, everybody wins as long as the enterprise is led in
a socially responsible way.

Case in point regarding how CEOs abuse their positions: they all fly in private jets. Plus, if they
are fired, they retain all their billions in stocks. So there’s a conflict of interest between
maximizing shareholder value and the CEO’s compensation when the CEO is also a
shareholder.

The best way to maximize shareholder value while being socially responsible is to allow the
federal government to legally cap CEO pay in publicly traded companies. They already do this
in some professional sports. Wall Street is overdue.
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Question 8 (2 points) Question 8 Unsaved
Financial planning asks all of the following questions EXCEPT:
Question 8 options:

What specific assets must the firm obtain in order to achieve its goals?

How much additional financing will the firm need to acquire assets?

When will the firm need to acquire external financing?

How does the firm determine its pricing strategy?
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Question 9 (2 points) Question 9 Unsaved
Advantages of debt financing include all of the following EXCEPT
Question 9 options:

covenants that provide important benefits to the borrower are normally included in debt
agreements.

interest payments on debt are tax-deductible.

the firm can acquire added funds without requiring current owners to contribute additional funds
of their own.

using debt can increase the return on equity to owners during periods of strong earnings.
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Question 10 (2 points) Question 10 Unsaved
_____ is the use of debt in a firm’s capital structure.
Question 10 options:

Financial leverage

Liquidity boosting

Debt loading

Discounting
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Question 11 (2 points) Question 11 Unsaved
Financial capital is used to meet short- and long-term obligations.
Question 11 options:
True
False
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Question 12 (2 points) Question 12 Unsaved
Historically, the goal of financial management has been to achieve a dominant market share.
Question 12 options:

True
False
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Question 13 (2 points) Question 13 Unsaved
Most common financial ratios are based on information taken from a firm’s balance sheet and
income statement.
Question 13 options:
True
False
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Question 14 (2 points) Question 14 Unsaved
The closer the debt ratio is to one, the greater the firm’s reliance on debt.
Question 14 options:
True
False
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Question 15 (2 points) Question 15 Unsaved
Cathy purchased several corporate bonds from a large corporation five years ago. Cathy
recently lost her job and has decided to sell the corporate bonds. Since the bonds have a
maturity date that is 10 years from the date of purchase, Cathy would not be able to sell her
bonds to other investors.
Question 15 options:
True
False
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Question 16 (2 points) Question 16 Unsaved
One disadvantage of equity financing is that it locks the firm into making fixed payments.
Question 16 options:

True
False
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Question 17 (2 points) Question 17 Unsaved
Equity financing yields the same tax benefits for a company that debt financing yields.
Question 17 options:
True
False
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Question 18 (2 points) Question 18 Unsaved
Financial leverage is the use of debt in a firm’s capital structure.
Question 18 options:
True
False
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Question 19 (2 points) Question 19 Unsaved
U.S. Treasury Bills are marketable, highly liquid short-term securities and are considered very
safe.
Question 19 options:
True
False
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Question 20 (2 points) Question 20 Unsaved
The Dodd-Frank Act requires large firms in the financial sector to
Question 20 options:

hold more debt and less equity.

participate in deleveraging.

rely on high financial leverage.

increase their debt-to-equity ratio.
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Question 21 (2 points) Question 21 Unsaved
Financial markets make it possible for companies to obtain financial resources.
Question 21 options:
True
False
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Question 22 (2 points) Question 22 Unsaved
The Federal Deposit Insurance Corporation was established by the Banking Act of 1933 and
insures depositors against financial loss if a bank fails.
Question 22 options:
True
False
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Question 23 (2 points) Question 23 Unsaved
Jack Richman works in senior management for Roan & Wright, Inc. During a recent strategy
session, Jack learned that the company was on the verge of announcing a major technological
breakthrough. He’s confident that once the breakthrough is announced to the public, the price of
the company’s stock will surge dramatically. If Jack buys more of his company’s stock before the
announcement, his actions could be investigated by the Securities and Exchange Commission.
Question 23 options:
True

False
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Question 24 (2 points) Question 24 Unsaved
Common stock is the basic form of ownership in a corporation.
Question 24 options:
True
False
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Question 25 (2 points) Question 25 Unsaved
A bond is a long-term debt instrument issued by a corporation or government entity.
Question 25 options:
True
False
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Question 26 (2 points) Question 26 Unsaved
Dan has $6,000 that he would like to invest. He wants to diversify his investment, but feels that
$6,000 isn’t enough to buy many different securities. Besides, he doesn’t know much about
picking good stocks and doesn’t want the hassle of trying to make investment decisions. Dan is
likely to find mutual funds an attractive way to invest his $6,000.
Question 26 options:
True
False
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Question 27 (2 points) Question 27 Unsaved
The stocks of Apple, Google and Microsoft are listed on the NASDAQ exchange.
Question 27 options:
True
False

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Question 28 (2 points) Question 28 Unsaved
The United States is the only nation with well-established securities exchanges set up to trade
securities on the secondary market.
Question 28 options:
True
False
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Question 29 (2 points) Question 29 Unsaved
The Dow Jones Industrial Average, also known as the Dow, is a security exchange where
stocks are traded.
Question 29 options:
True
False
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Question 30 (2 points) Question 30 Unsaved
The _____ created the Federal Reserve System, with its primary responsibility being to oversee
our nation’s banking system.
Question 30 options:

Banking Act of 1933

Federal Reserve Act of 1913

Glass-Steagall Act

Securities Act of 1933
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Question 31 (2 points) Question 31 Unsaved
Common stockholders have all of the following rights EXCEPT
Question 31 options:

a preemptive right.

the right to repayment of the principal.

voting rights.

a right to residual claim on assets.
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Question 32 (2 points) Question 32 Unsaved
The Price/Earnings ratio
Question 32 options:

develops an investor’s knowledge of the prices of various stocks in a single industry.

is of little value to investors these days due to the fact that market values far exceed earnings
value.

is important to investors because they want this ratio to be 1:1.

is a multiple that shows investors how many times over earnings a particular stock price is
trading.
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Question 33 (2 points) Question 33 Unsaved

The Securities Exchange Act of 1934 established the Securities and Exchange Commission and
gave it broad powers to oversee the securities industry.
Question 33 options:
True
False
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Question 34 (2 points) Question 34 Unsaved
The Securities and Exchange Commission is the federal agency that has the authority to
investigate allegations of illegal insider trading.
Question 34 options:
True
False
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Question 35 (2 points) Question 35 Unsaved
The primary purpose of the Federal Reserve Act of 1913 was to stabilize the nations’s banking
system.
Question 35 options:
True
False
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Question 36 (2 points) Question 36 Unsaved
One of the first things you can do in your effort to prepare a budget is to track and analyze your
personal financial decisions for a few weeks, including what you take in and what you spend,
and how you use your money.
Question 36 options:
True
False
Save

Question 37 (2 points) Question 37 Unsaved
Candace just purchased an iced coffee from the local coffee shop. Candace’s purchase is an
example of a nondiscretionary payment.
Question 37 options:
True
False
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Question 38 (2 points) Question 38 Unsaved
The Federal Deposit Insurance Corporation is an independent government agency that protects
individual investments in the stock market.
Question 38 options:
True
False
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Question 39 (2 points) Question 39 Unsaved
A key to financial security is the creation of a “safety net.” This “safety net” should be able to
cover six months of your expenses.
Question 39 options:
True
False
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Question 40 (2 points) Question 40 Unsaved
Your ability to purchase goods or resources without making immediate payment is known as an
investment.
Question 40 options:
True
False
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Question 41 (2 points) Question 41 Unsaved
The benefits of having a credit card include not having to carry cash and the opportunity to
establish a credit history.
Question 41 options:
True
False
Save
Question 42 (2 points) Question 42 Unsaved
The Dodd-Frank Act created the Consumer Financial Protection Bureau to provide consumers
with information that would assist them in making a decision on the best credit card for the
consumer.
Question 42 options:
True
False
Save
Question 43 (2 points) Question 43 Unsaved
Recently your Aunt Gertie asked you about investing $10,000. During the course of your
conversation, she mentioned that she was looking for a maximum level of safety. Based on this
information, you suggest you invest the $10,000 in corporate stock.
Question 43 options:
True
False
Save
Question 44 (2 points) Question 44 Unsaved
It is never a good idea to have a diversified portfolio because your investments are spread out
and can result in increased risk.
Question 44 options:
True
False

Save
Question 45 (2 points) Question 45 Unsaved
April is addicted to her Venti Caramel Frappe, and she has one every single day. When she
calls home to talk to dad about needing more money for “school supplies,” he’s like, “Whoa.” So
she has to explain to dad that she has a pretty high “latte factor.” How does the conversation
end, if it ends as a positive step in April’s life?
Question 45 options:

April tells her dad that her Frappe is a nondiscretionary cost; therefore she’ll be “waiting down at
the Western Union, if you know what I mean.”

April’s dad explains to her that her “latte factor” needs to diminish, reminds her that she is living
on a student income, and tells her to get a job as he cuts her off from her college fund.

April decides that her Frappe-a-day is risky for her financial health, and decides to change her
habits. In exchange for that commitment, daddy, who loves her dearly, emails her a link to a
budgeting tool to help her better manage what she has.

April’s dad counsels her to apply for a credit card so that she can build credit while
simultaneously getting her daily fix.
Save
Question 46 (2 points) Question 46 Unsaved
What is one of the reasons why the Dodd-Frank Act created the Consumer Financial Protection
Bureau?
Question 46 options:

to protect the credit card companies from bad debt

to give consumers the opportunity to buy a copy of their credit score before applying for a credit
card

to pre-approve consumers for credit cards

to make it easier for consumers to compare the features and costs of credit cards
Save
Question 47 (2 points) Question 47 Unsaved
After a review of your friend’s current financial situation, you discovered she was carrying a
$4,500 credit card balance with an APR of 22%. The best advice you can give to your friend is
to
Question 47 options:

eliminate using her credit card for nonessential purchases.

switch credit card companies, since many companies offer benefits like frequent-flier miles.

keep using the card and not to worry about the balance, since all interest is tax deductible.

place a high priority on eliminating her credit card balance.
Save
Question 48 (2 points) Question 48 Unsaved
Why is investing earlier in life preferable?
Question 48 options:

so you can stop while you’re buying your home

to take advantage of the compounding effect

to use that money for a new car

so you can retire when you’re 40 years old
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Question 49 (2 points) Question 49 Unsaved
All contributions to a Roth IRA are _____ but withdrawals are _____.
Question 49 options:

tax-free; taxable

taxable; tax-free

passive; tax-free

tax-free; subject only to state taxes
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Question 50 (2 points) Question 50 Unsaved
One advantage of participating in a company-sponsored retirement plan is
Question 50 options:

you always pay taxes on these contributions during the year you contribute.

you are allowed to contribute only half as much as you would contribute to an IRA, so you get to
keep more of your earnings.

time value of money does not apply.

companies will often participate in a matching process, where they will contribute a percentage
of the amount you contribute.

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