Question #1

When a corporation uses the financial markets to raise new funds, the sale of securities is said to be made in the primary market.
True
False

Question #2

The free cash flows that are generated from the firm's operations and investments in assets must always be equal to the free cash flows paid to or received from the company's investor financing.
True
False

Question #3

All of the following are core financial principles except a firm's expenditures will always increase as its revenues increase cash flows, not profit, are are the proper measures of wealth a dollar today is worth more than a dollar tomorrow additional risk must be accompanied by additional corresponding additional expected return

Question #4

Hayek Inc. has total assets of $400,000, total liabilities of $140,000, a preferred stock obligation of $10,000, and 50,000 outstanding shares of common stock. What is Hayek, Inc.'s book value per share?
4.0
4.8
5.8
5.0

Question #5

In the U.S., inflation was not considered an important factor in financial decisions until
1930
1965
1948
1982

Question #6

All of the following are primary sources of capital except
bondholders
preferred stockholders
common stockholders
company liabilities

Question #7

All of the following statements about restructuring are true except
Results in large reductions of the workforce
Results in changes in how liabilities and equity are reflected on the balance sheet
A forced restructuring is a result of a company's poor performance
Results in the selling off of the firm's most profitable divisions

Question #8

Which formula best describes the composition of the basic balance sheet?
current assets - current liabilities = fixed assets - current stock - retained earnings - long term liabilities
total assets = total equity - total liability
current assets + fixed assets = current liabilities + long term liabilities + current stock + retained earnings
total liabilities = total assets + total equity

Question #9

The balance sheet's primary function is to measure a firm's profits and losses.
True
False

Question #10

Which of the following are drawbacks to using profit maximization as the primary goal of the firm?
The timing of benefits is not taken into consideration
Potentially higher profits are usually accompanied by higher risk
Profit may not be accurately measured due to the various ways of defining profit
All of the above

Question #11
If shareholder wealth is measured by the market capitalization of the firm, what would be the total shareholder wealth of a firm that has 300,000 common shares outstanding and 50,000 preferred shares issued? Its current common stock price is $25.00, and its current preferred stock price per share is $10.00.
$8,750,000
$8,000,000
$7,500,000
$7,000,000

Question #12
Inventory is generally considered less liquid than marketable securities.
True
False

Question #13
The superior primary financial goal for all businesses is
maximizing shareholder wealth
profit maximization
maximizing revenue
maximizing customer satisfaction

Question #14
In 2011, Blackstone Inc. had a net income of $120,000, depreciation expense of $20,000, a decrease in accounts receivable of $20,000, an increase in inventory of $10,000, a decrease in accounts payable of $15,000, an increase in plant and equipment of $115,000, an increase in bonds payable of $40,000, and $45,000 of common stock dividends paid. What is the net increase (decrease) in Serious Corp.'s cash flows?
net decrease of $15,000
net increase of $5,000
net increase of $15,000
net decrease of $5,000

Question #15
All of the following about the statement of cash flows are true except
Depreciation deducted in the income statement is added back to net income in the statement of cash flows to determine cash flow
The three primary sections include cash flows from operating, investing and financing activities
The purpose is to emphasize the critical nature of cash flow to the operations of the firm
The statement of cash flows is based on the accrual method of accounting

Question #16
Capital markets refer to those markets dealing with securities that have a life of one year or less and money markets refer to those markets where securities have a life greater than one year.
True
False