Day-to-day cash management is one of the fundamental concepts that a nonfinancial manager
should understand in order to:
a. better assess future financing requirements.
b. better understand the role of capital markets in raising long-term funds.
c. better assess the current environment in which the firm operates.
d. better measure and create value for the shareholders.
2. The cash flow cycle ________.
a. describes the flow of cash through a company
b. illustrates that profits and cash flows are the same
c. reminds a financial manager that profits are important
d. focuses on financing activities only
3. Raising new capital through the sale of common equity is an example of which cash-related
activity in the cash flow cycle?
a. operating activity
b. profitability activity
c. investing activity
d. financing activity
4. The main duties of financial managers are ________.
a. assessing the current business situation and future financing needs
b. developing long-term financing strategies
c. assessing future investments
d. all of the above
5. The true owners of the corporation are the ________.
a. holders of debt issues of the firm
b. board of directors of the firm
c. creditors
d. common stockholders
6. Which of the following organization forms accounts for the most revenue?
a. “S” corporation
b. Limited partnership
c. “C” corporation
d. Limited liability company
7. Which of the following factors enable a public corporation to grow to a greater extent, and
perhaps at a faster rate, than a partnership or proprietorship?
a. unlimited liability of the shareholders
b. limited life
c. access to the capital markets
d. elimination of double taxation corporate income
8. The ________ measure a firm’s performance over a specified period of time whereas a ________
provides a snapshot of the firm as of a specific date.
a. income and balance sheets; cash flow statement
b. balance sheet and cash flow statement; income statement
c. balance sheet and cash flow statement; cash flow statement
d. income and cash flow statements; balance sheet
9. A comprehensive nonfinancial size-up is ________.
a. useful in analyzing the firm’s abilities
b. critical in understanding the firm’s historical position
c. only necessary if a firm is failing
d. all of the above
10. The two key external factors that impact the firm’s cash flows are ________.
a. the overall economy and future financing needs
b. the level of interest rates and working capital requirements
c. the overall economy and the nature and structure of the industry
d. working capital requirements and growth projections
11. The financial management framework focuses on which three areas of decision-making?
a. operating, investing, and profitability
b. investing, financing, and operating
c. profitability, financing, and investing
d. operating, financing, and profitability
12. The overall goal in sizing-up each of the external and internal factors is to ________.
a. determine the competitive position of the firm relative to its competitors
b. make better investment decisions
c. assess the company’s strengths and weaknesses
d. increase the value of the enterprise
13. Which of the following is NOT a component of GDP?
a. healthcare sector
b. consumer sector
c. business investment sector
d. government sector
14. If the firm’s management is assessing the economics of their business model, they are engaged
in which of the four areas of human resources management?
a. strategic intelligence
b. organizational intelligence
c. people intelligence
d. business intelligence
15. Other factors to consider in the management analysis include ________.
a. the size and current growth stage of the firm
b. the teamwork skills of the company as a whole
c. the retention of the management team
d. all of the above
16. There are a number of key management attributes that are required to improve a firm’s
chances of business success which include ________.
a. middle managers with leadership potential
b. managers with experience in the industry in which the firm operates
c. chief executive officers
d. managers with expertise and technical knowledge in the functional areas
17. If the firm’s management is assessing the opportunities and risks that a business faces, they
are engaged in which of the four areas of human resources management?
a. business intelligence
b. strategic intelligence
c. organizational intelligence
d. people intelligence
18. Sizing up a business is relevant for managers because:
a. it helps managers better understand customer needs
b. understanding overall economic performance helps explain a firm’s past financal
performance.
c. it helps highlight key supply and demand risks and internal capabilities
d. all of the above
19. A study of of Porter’s Five Forces for a retail consumer products firm such as Home Depot
might include each of the following EXCEPT:
a. an analysis of existing competition with the industry.
b. an analysis of the threat of substitutes.
c. an analysis of customer bargaining power.
d. Each of the above would be included in a study of Porter’s Five Forces
20. A firm is evaluating the best means to have a positive impact on potential buyers. Which one of
the four P’s is the firm addressing?
a. product
b. promotion
c. price
d. place
21. Which of the basic financial statements attempts to measure the earnings of the firm’s
operations over a given time period?
a. balance sheet
b. income statement
c. cash flow statement
d. none of the above
22. Which of the following would NOT be included as an asset on a corporate balance sheet?
a. accounts receivable
b. preferred stock
c. inventory
d. buildings
23. Which of the following is the least liquid current asset?
a. accruals
b. inventory
c. accounts receivable
d. marketable securities
24. Which of the following best represents operating income?
a. earnings before interest and taxes
b. income after financing activities
c. income from capital gains
d. income from discontinued operations
25. A consolidated balance sheet refers to:
a. a balance sheet of a large firm that has combined the balance sheets for all wholly owned
and some partially owned subsidiaries into one separate balance sheet.
b. a balance sheet of a large firm that has one subsidiary with its own balance sheet.
c. a balance sheet of a large firm that has combined the balance sheet of all partially owned
subsidiaries into one separate balance sheet.
d. a balance sheet of a large firm that has numerous subsidiaries, each with its own balance
sheet that have been combining into one all-encompassing balance sheet.
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