Principles of Finance

CHAPTER 1—AN OVERVIEW OF FINANCE

MULTIPLE CHOICE

1. Which of the following are NOT factors that have made the trend toward globalization mandatory for many businesses?

a.|Lower trade barriers|

b.|Demand for high-quality, low-cost products|

c.|Increased volatility of exchange rates for foreign currency|

d.|Increased development costs|

e.|Improvements in transportation and communications.|

ANS: C PTS: 1 DIF: Moderate TOP: Globalization of Business

2. Which of the following is NOT one of the most important trends in managerial finance from the 1990s that continued into the twenty-first century?

a.|Regulatory attitude of government|

b.|Ongoing adaptation of electronic technology|

c.|Focus on corporate liquidity|

d.|Continued globalization of business|

e.|All of the above|

ANS: C PTS: 1 DIF: Moderate TOP: Managerial Finance

3. Which of the following statements are true?

a.|The value of any investment is based on the cash flows it is expected to generate in the future.|

b.|Investors are not generally risk averse.|

c.|Uncertain cash flows are preferred to certain cash flows.|

d.|All of the above are true.|

e.|None of the above are true.|

ANS: A PTS: 1 DIF: Moderate TOP: Value

4. A basic knowledge of finance will help you with your personal investments by helping you understand

a.|how to accurately predict changes in the short term interest rates.|

b.|how to determine the optimal dividend policy for each firm.|

c.|how to determine which technology is most likely to be accepted by consumers.|

d.|how to review companies and industries to determine their prospects for future growth and the risk inherent in those companies and industries.|

e.|how to predict the growth in sales for the firm.|

ANS: D PTS: 1 DIF: Moderate TOP: Investments

5. Which of the following is NOT one of the several new areas that managerial finance expanded to focus on in the 1980s?

a.|The dramatic increase in both the use of computers for analysis and the electronic transfer of...