1. Direct Labor is part of both Prime costs as well as Conversion costs. Answer True or False.

Select one:
a. True (https://www.coursehero.com/file/5871273/managerial-answer-key/)
b. False

2. Other things being equal, a higher discount rate will result in a lower present value. Answer
True or False.
Select one:
a. True http://www.investopedia.com/terms/p/presentvalue.asp
b. False

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3. The financial goal of a modern corporation is to

Select one:
a. Minimize costs
b. Maximize revenues
c. Maximize shareholder wealth
d. Maximize profits

4. According to Cost-Volume-Profit (CVP) Analysis

Select one:
a. Fixed costs remain the same over all levels of production
b. All costs are either variable or fixed
c. All of the THESE

d. The unit selling price and variable cost remain the same over all levels of production

5. "Shareholder wealth" in a firm is represented by:

Select one:
a. the amount of salary paid to its employees
b. the market price per share of the firm's common stock.
c. the book value of the amount invested by shareholders in the firm
d. the book value of the firm's assets less the book value of its liabilities

6. A major advantage of the Corporate form of organization is

Select one:
a. legal restrictions
b. ease of organization
c. limited owner liability
d. reduction of double taxation

7. Which of the following is TRUE

Select one:
a. An ordinary annuity has payments at the end of each year
b. A perpetuity is a perpetual annuity

c. All of these
d. An annuity due has payments at the beginning of each year

8. In general, companies prefer internal corporate financing (i.e. retained earnings) over
external sources of funds. Answer True or False.
Select one:
a. False
b. True

9. $800 is invested for 5years at 4.2% per annum compounded annually. What will be the amount at
maturity?
Select one:
a. $982.72
b. $4168.00
c. $1112.32
d. $813.68

10. Initial Public Offering (or IPO) is traded only in the Primary market and not in the secondary
market. Answer True or False.
Select one:
a. False
b. True (http://www.financewalk.com/2012/primary-market-secondary-market/)

11. A finance company offers to give $20,000 after 10yrs at 8% annual return compounded
annually. What is the amount you need to invest today?
Select one:
a. $10,000.00
b. $8,111.11
c. $8,754.23
d. $9,263.87

12. Costs associated with the conflicts of interest between the bondholders and the shareholders of
a corporation are called:
Select one:
a. legal costs.
b. bankruptcy costs.
c. administrative costs.
d. agency costs.

13. If the PV of $139 is $125, what is the discount factor?

Select one:
a. 1.112
b. 0.285
c. 0.912
d. 0.899

14. A firm's investment decision is also called its:

Select one:
a. leasing decision.
b. liquidity decision.
c. financing decision.
d. capital budgeting decision.

15. What is the overarching goal of financial markets?

Select one:
a. Channel savings from surplus units to deficit units [L1 S26]
b. Channel money from the bank to both deficit units and surplus units
c. Channel savings from deficit units to surplus units
d. Channel savings from both deficit units and surplus units to the bank

16. Break Even Volume is the Volume of Sales where Profit = 0. Answer True or False.
Select one:
a. True
b. False

17. Avenues for direct financing from external sources of funds include the following:
Select one:
a. Bond Markets only
b. Both Stock Markets and Bond Markets [L1 S28]
c. Bank Loans
d. Stock Markets only

18. Interest rates and bond prices

Select one:
a. sometimes move in the same direction, sometimes in opposite directions
b. have no relationship with each other (i.e., they are independent)
c. move in the same direction
d. move in opposite directions

19. XYZ firm decides to have a new advertisement campaign as a part of their marketing strategy in
order to increase sales. The costs incurred for the new campaign come under
Select one:
a. Neither Product nor Period costs
b. Period costs
c. Both Product & Period costs
d. Product costs

20. Which of the following are valid ways to reduce agency costs?
Select one:

a. Monitoring
b. Compensation plans such as ESOPs
c. All of the above
d. Regulations such as SOX

21. Which of the following is TRUE about Money market securities:

Select one:
a. Money market securities are less widely traded than long-term securities and hence more liquid
b. Money market securities are less widely traded than long-term securities and hence less liquid
c. Money market securities are more widely traded than long-term securities and hence less liquid
d. Money market securities are more widely traded than long-term securities and hence more liquid

22. Nursing costs in a hospital are examples of

Select one:
a. Fixed costs
b. Semi-variable costs
c. Variable costs
d. Step costs

23. What is Corporate Governance:

Select one:
a. System of policies, principles, and procedures to overcome conflicts of interest

b. None of the THESE

c. All of the THESE (L1 s16)
d. Clearly defined responsibilities and accountabilities to overcome conflicts of interest

24. Agency problems enhance firm value. Answer True or False.

Select one:
a. False (L1 S20)
b. True

25. If an investor may have to sell a bond prior to maturity and interest rates have risen since the
bond was purchased, the investor is exposed to
Select one:
a. a perpetuity
b. the coupon effect
c. interest rate risk
d. an indefinite maturity