FIN2101 Module Book

9. Practice Questions - Fill in the Blanks

science
1. art
Business Finance can be defined as the __________ and __________ of
managing money.

2. accrual
Accountants generally use the __________ method while in finance, the focus
cashflows
is on __________.

3. financing
The right-hand side of the balance sheet refers to the company __________
investment
decisions while the left-hand side of the balance sheet refers to its __________
decisions.

4. shareholder wealth.
The goal of the company is to maximise __________

5. level
Wealth maximisation considers the __________, timing
__________, risk
and __________
of the cash flows.

6. higher
If we invest in a high-risk investment, we expect a __________ return. If we
lower
invest in a low-risk investment, we accept a __________ return. However, we
different
should realise that the actual return can be very __________ from our
expectations.

7. 100
Agency problems may occur when the managers own less than __________ %
of the company e .

8. shareholder and the threat of a _______________

Market forces such as major __________ hostile
act to keep managers in check.

9. shareholder
Agency costs are borne by __________ and examples of such costs are
incentive
_______________ peformance plans
and _______________.
eg. stock

10. conduct
Ethics is the standards of __________ moral
or __________ judgement.

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 FIN2101 Module Book

10. Practice Questions - Multiple Choice Questions

1. Which of the following best describes the main role of the financial manager?

(A) To prepare financial accounts.

(B)
(C)
To analyse financial statements.
To keep records of transactions. b
(D) To audit financial accounts.

2. A finance manage ima g al h ld be ____________________.

(A) maximise the revenue of the company

(B) maximise the wealth of the company ne
(C) maximise the operating expenses of the company
(D) maximise the profit of the company b
3. A company eal h i be mea ed b he company __________.

(A) assets
(B) profits
(C) share price
(D) talent pool c
4. Agency costs are borne by __________.

(A) government
(B) managers
(C) creditors D
(D) shareholders

5. Which of the following statement is INCORRECT?

(A) When we take on more risk, we usually expect to be compensated with a

higher return.
(B) When we invest in a low-risk investment, we should be willing to accept
a low return.
(C) When we invest in a high-risk investment, we will receive a high return.
(D) The actual return on an investment may be different from our
expectations.

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