Question

. TRUE / FALSE QUESTIONS Enter “True” or “False” on the blank preceding each question. ______ 1. Finance can be defined as the art and science of managing money. ______ 2. The field of Finance is an outgrowth of philosophy, which dates back to the 16th century. ______ 3. The primary principle used by financial managers when making decisions is “marginal cost/benefit analysis. ______ 4. The Sarbanes-Oxley Act of 2002 established an oversight board to monitor the accounting industry. ______ 5. A disadvantage of the sole proprietorship form of business organization is that it is more expensive to organize a business in this way vs. the other forms of business organization. ______ 6. Among all of the firms in the U.S., nearly three-fourths of them are organized as corporations. ______ 7. Earnings of corporations in the U.S. are now taxed at a flat 21% rate. ______ 8. A “capital gain” results when a firm sells an investment for less than its original purchase price. ______ 9. For corporations only, 10% of the dividend income received from investment in the stock of another corporation is excluded from taxation. ______ 10. A corporation’s financial statements are prepared according to the requirements of the Generally Accepted Accounting Principles (GAAP). ______ 11. Both the “Current Ratio” and the “Quick Ratio” measure a firm’s liquidity. ______ 12. For both the firm’s “Inventory” and its “Accounts Receivable,” it is desirable for the turnover rates of these accounts to have low values. ______ 13. The less debt a corporation uses to finance its “Total Assets,” the greater its financial leverage. ______ 14. Most managers are “risk-averse,” as for a given increase in risk, they require an increase in return. ______ 15. The standard deviation can be used to measure the risk associated with a given asset. It measures the dispersion of the asset’s possible returns around the asset’s expected return. ______ 16. In general, the higher the positive correlation between the returns for a given set of assets, the greater the reduction In risk that the investor can achieve by investing in these assets.

Answer 1

1. Finance can be defined as the art and science of managing money : True

2. The field of finance is an outgrowth of .......: False

3. The primary principle used by financial managers.........True.

4. The Sarbanes Oxley Act of 2002 established...............True

5. False

6. False

7. True

8. False

9. False

10. True

11. True

12. False

13. False

14. False.

15. True

16. False

9.