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Multiple Choice CHAPTER 1 Foundations of Financial Management - BLOCK

NAME _______________________________________________

1. Which of the following are microeconomic variables that help define and explain the discipline of finance?
A) risk and return
B) capital structure
C) inflation
D) all of the above

2. One primary macroeconomic variable that helps define and explain the discipline of finance?
A) capital structure
B) inflation
C) technology
D) risk

3. The money markets deal with _________.

A) securities with a life of more than one year
B) short-term securities
C) securities such as common stock
D) none of the above

4. The ability of a firm to convert an asset to cash is called ____________.

A) liquidity
B) solvency
C) return
D) marketability

5. Early in the history of finance, an important issue was:

A) liquidity
B) technology
C) capital structure
D) financing options

6. The ___________________ is the most common form of business organization in the U.S.
A) corporation
B) partnership
C) sole proprietorship
D) none of the above

7. The ____________________ has more sales in dollars than any other form of business organization.
A) sole proprietorship
B) partnership
C) corporation
D) none of the above

8. One major disadvantage of the sole proprietorship is ________________.

A) simplicity of decision-making
B) unlimited liability
C) low operational costs
D) none of the above

9. The appropriate firm goal in a capitalist society is ________________.

A) profit maximization
B) shareholder wealth maximization
C) social responsibility
D) none of the above

10. The agency problem will occur in a business firm if the goals of ____________ and shareholders do not agree.
A) investors
B) the public
C) management
D) none of the above