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Fin 223: Sample MCQ, CH-1: Answers: 1. (B) 2. (C) 3. (A) 4. (D) 5. (D) 6 (D)
Fin 223: Sample MCQ, CH-1: Answers: 1. (B) 2. (C) 3. (A) 4. (D) 5. (D) 6 (D)
(a) The flow of savings of lenders to borrowers in return for the IOU of the
borrower.
(b) The flow of borrowed funds directly to deficit spending units.
(c) The purchase of indirect financial claims of financial intermediaries and the
subsequent purchase of direct financial claims, held as liabilities of financial
intermediaries.
(d) The purchase of direct financial claims with funds raised by issuing separate
indirect financial claims to savers.
Answers:
1. (b) 2. (c) 3. (a) 4. (d) 5. (d) 6(d)
7. Shareholder wealth" in a firm is represented by:
10. The decision function of financial management can be broken down into the
decisions.
a. A general partnership.
b. A corporation.
c. A sole proprietorship.
d. None of the above.
Answers
7. (a) 8. (b) 9. (c) 10. (b) 11.(b)
12. A major advantage of the corporate form of organization is:
a. Ease of organization.
b. Limited owner liability.
c. Legal restrictions.
d. Reduction of double taxation.
16. Which of the following statements best describes the purpose of financial accounting
in a limited liability company?
Answers
12. (b) 13. (a) 14. (c) 15. (b) 16. (d)
17. Sole traders differ from other types of trading organizations. Which of the following
statements correctly summarizes the key characteristics of a sole trader’s business?
a. Liability is limited to the providers of loan finance and only the trader takes an active
part in managing the business.
b. The trader has unlimited liability and runs the business in conjunction with the
providers of loan finance.
c. The trader has unlimited liability and must have the business accounts audited.
d. The trader has unlimited liability, takes sole responsibility for management of the
business and no audit is needed.
19. Markets in which funds are transferred from those who have excess funds available
to those who have a shortage of available funds are called
a. Commodity markets.
b. Fund-available markets.
c. Derivative exchange markets.
d. Financial markets.
20. Economists group commercial banks, savings and loan associations, credit unions,
mutual funds, mutual savings banks, insurance companies, pension funds, and finance
companies together under the heading financial intermediaries. Financial
intermediaries-
a. Act as middlemen, borrowing funds from those who have saved and lending
these funds to others.
b. Produce nothing of value and are therefore a drain on society’s resources.
c. Help promote a more efficient and dynamic economy.
d. Do all of the above
e. Do only (a) and (c) of the above.
Answers
17. (d) 18. (d) 19. (d) 20. (e)
21. Economists group commercial banks, savings and loan associations, credit unions,
mutual funds, mutual savings banks, insurance companies, pension funds, and finance
companies together under the heading financial intermediaries. Financial
intermediaries-
a. Act as middlemen, borrowing funds from those who have saved and lending these
funds to others.
b. Play an important role in determining the quantity of money in the economy.
c. Help promote a more efficient and dynamic economy.
d. Do all of the above.
e. Do only (A) and (C) of the above.
a. Bringing together people with funds to lend and people who want to borrow
funds.
b. Assuring that the swings in the business cycle are less pronounced.
c. Assuring that governments need never resort to printing money.
d. Both (a) and (c) of the above.
e. Both (b) and (c) of the above.
a. Exist because there are substantial information and transaction costs in the
economy.
b. Improve the lot of the small saver.
c. Are involved in the process of indirect finance.
d. Do all of the above.
e. Do only (a) and (c) of the above.
Answers
21. (d) 22. (d) 23. (a) 24. (d)
25. Which of the following can be described as involving direct finance?
26. The main sources of financing for businesses, in order of importance, are –
a. 5 years
b. 2 years
c. 1 year and above
d. 1 year and less
a. Inventory control
b. Receipt and disbursement of funds
c. Credit management
d. All of the above
29. Financial markets (1 year or less) that deals with short term securities called as-
a. Capital Market
b. Money Market
c. Secondary Market
d. Stock Market
Answers
25. (e) 26. (a) 27. (d) 28. (d) 29. (b)
30. Which has continual life?
a. Sole proprietorship
b. Corporation
c. Partnership
d. All of the above
a. 55 stockholders
b. 65 stockholders
c. 75 stockholders
d. 85 stockholders
a. Someone has information not available to the public which they use to profit from
trading in stocks.
b. Corporate officers buy stock in their company.
c. Lawyers, investment bankers, and others buy common stock in companies
represented by their firms.
d. Any stock transactions occur in violation of the Federal Trade Commission’s
restrictions on monopolies.
Answers
30. (b) 31. (c) 32. (b) 33. (a) 34. (a)
35. What is the primary goal of financial management?
a. Increased earnings
b. Maximizing cash flow
c. Maximizing shareholder wealth
d. Minimizing risk of the firm
37. A corporation is –
Answers
35. (c) 36. (b) 37. (d) 38. (a) 39. (b)
40. Agency problems are least likely to arise in which organizational form?
a. Sole proprietorship
b. Limited partnership
c. Corporation
d. Subchapter S corporation
42. Which of the following is not a true statement about the goal of maximizing
shareholder wealth?
Answers
40. (a) 41. (d) 42. (b)
A. S. Masum
Leading University, Sylhet