Corporate Finance 8th Canadian Edition By Stephen A. Ross – Test Bank

Chapter 01

Introduction to Corporate Finance

Multiple Choice Questions

1. The balance sheet is made up of what five key components:
   A.fixed assets, current liabilities, long term debt, tangible current assets and shareholders’ equity.
   B. intangible fixed assets, current liabilities, long term debt, net income and current assets.
   C. fixed assets, long term debt, current assets, current liabilities and shareholders’ equity.
   D. current assets, fixed assets, long term debt, shareholders equity and retained earnings.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Topic: 01-01 What is Corporate Finance?

2. In terms of the balance sheet model of the firm, the value of the firm in financial markets is equal to:
   A.tangible fixed assets plus intangible fixed assets.
   B. sales minus costs.
   C. cash inflow minus cash outflow.
   D. the value of the debt plus the value of the equity.
   E. the value of the debt minus the value of the equity.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Topic: 01-01 What is Corporate Finance?

3. Inventory is a component of:
   A.current assets.
   B. current liabilities.
   C. equity.
   D. fixed assets.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Topic: 01-01 What is Corporate Finance?

4. Using the balance sheet model of the firm, finance may be thought of as analysis of three primary subject areas. Which of the following groups correctly lists these three areas?
   A.Capital budgeting, capital structure, net working capital.
   B. Capital budgeting, capital structure, security marketing.
   C. Capital budgeting, net working capital, tax analysis.
   D. Capital budgeting, tax analysis, security marketing.
   E. Net working capital, tax analysis, security marketing.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Topic: 01-01 What is Corporate Finance?

5. Which of the following is not considered one of the basic questions of corporate finance?
   A.What long-lived assets should the firm invest?
   B. How much inventory should the firm hold?
   C. How can the firm raise cash for required capital expenditures?
   D. How should the short-term operating cash flows be managed?

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Topic: 01-01 What is Corporate Finance?

 

6. The need to manage net working capital arises because:
   A.financial management is naturally broken into those areas.
   B. shareholders want to ensure they receive dividend payments.
   C. there is a mismatch between the timing of cash inflows and cash outflows.
   D. the sum of current assets and current liabilities usually is zero.
   E. the capital structure pie is limited in size.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Topic: 01-01 What is Corporate Finance?