Question 1

1. As Chief Financial Officer, your sole concern should be to increase the reported profits of the company.
True
False

Question 2

1. In the ABC form of the balance sheet (where A stands for Assets, B for Borrowings and C for Capital), A + B = C.
True
False

Question 3

1. The invention of money, the ability to deposit or withdraw funds at a bank and the acceptance of letters of credit in distant countries all contributed to the expansion of commerce.
True
False

Question 4

1. The Dutch East India Company is considered the first modern corporation. However, the stockholders could not sell their shares easily and were at risk for more than their original investment.
True
False

Question 5

1. Collateral is an important part of every unsecured loan.
True
False

Question 6

1. Ownership of assets confirmed by property title may be used as collateral. A mortgage agreement gives the lender the right to foreclose in order to take possession if the loan is in default.
True
False

Question 7

1. The balance sheet item which links to the profit or loss of the business is called retained earnings.
True
False

Question 8

1. The House of Medici developed a general ledger system using double entry bookkeeping.
True
False

Question 9

1. Put these financial developments in the correct order of development starting with 1 being the earliest and 5 being the most recent.
the House of Medici bank

Dutch East India Company

Banque Generale in France

Paper money (drafts or notes)

Barter

Question 10

1. Put these elements of the income statement in the correct order starting with 1 being the item listed highest on the income statement down to 6 for the item listed closest to the bottom of the income statement.
Gross Profit (or Gross Margin)

Net Income (or Net Earnings)

EBITDA

Pre-Tax Income (or Pre-Tax Earnings)

EBIT

Sales (or Revenue)

Question 11

1. Put these elements of the income statement in the correct order starting with 1 being the item listed highest on the income statement down to 5 for the item listed closest to the bottom of the income statement.

Interest

Expenses

Depreciation and Amortization

Cost of Sales (or Cost of Goods Sold)

Taxes

Question 12

1. Put these types of assets into order stating with 1 being the most liquid down to 4 being the least liquid.
Inventory

Accounts Receivable

Cash

Property, Plant and Equipment

Question 13

1. It is the responsibility of the financial manager to [BLANK].

maximize the company's risk

arrange for the future sale of the company

increase the future cash flows and selling price, decrease the company's risk and improve reporting quality

insure that the accounting system reports maximum profits

none of these answers

Question 14

1. What are the three primary forms of property?

Land, buildings, and furniture

Inventory, accounts receivable, and cash

Real, personal, and intellectual

Time, money, and risk

Question 15

1. Key to all financial decisions is the interrelationship between [BLANK].

banking, lending, and money

barter, collateral, and loans

time, money, and risk

risk, return, and debt

cash, collateral, and loans

Question 16

1. What are the three primary forms of business organization? (Select three from the list.)

Mutual Fund

Sole Proprietorship

Non-Profit Foundation

Partnership

Agency

Corporation

Question 17

1. Select the balance sheet items which are either current assets or current liabilities. (You may need to select more than one item from the list.)

Land

Cash

Retained Earnings

Payroll

Mortgage Debt

Inventory

Accounts Payable

Question 18

1. On the line next to each description in Column A, place the letter of the financial development in Column B which it describes.

2. First Modern Corporation

Most Powerful Bank in Europe during the Renaissance

Location of First Stock Exchange

• First Central Bank

A. Banque Generale

B. House of Medici

C. Amsterdam

D. Dutch East India Company

Question 19

1. If a lender wants a 4% real return, determines that risk of default is 6% and assumes an inflation rate of 2%, what interest rate should he charge? (Please answer with a whole number (1, 2, 3, etc.) rather than with a decimal or percentage answer. That is, if you think that the answer is 3%, then please enter "3" as the answer.)

Question 20

1. A lender is charging 15% for a loan. This type of borrower has a risk of default of 6%. The inflation rate during the period of the loan is 4%, What is the real rate of return on the loan? (Please answer with a whole number (1, 2, 3, etc.) rather than with a decimal or percentage answer. That is, if you think that the answer is 3%, then please enter "3" as the answer.)