Test Bank for CFIN 6th Edition by Besley

1. Which of the following statements is correct? Assume everything else equal.

	a.	Riskier assets always have higher market values.
	b.	Riskier assets are more valuable than (preferred to) less risky assets.
	c.	The sooner cash is received, the more valuable it is.
	d.	Investors generally prefer short-term, high-risk assets investments.
	e.	Investors generally receive higher returns on investments with low risk than investments with high risk.

ANSWER:

2. The success of financial institutions depends on _____.

	a.	the understanding of the factors that cause interest rates and other returns in the financial markets to rise and fall
	b.	the environmentally responsible behavior of the shareholders of corporations
	c.	the expectations of long-term investors in the company
	d.	the awareness of the shareholders regarding the regulations that affect public corporations
	e.	the prior knowledge of the decisions that public corporations make concerning their cash flows

ANSWER:

3. Which of the following is true of the investment function of finance?

	a.	The investment function focuses on socially responsible actions taken by corporations.
	b.	The investment function focuses on the values, risks, and returns associated with financial assets such as stocks and bonds.
	c.	The investment function focuses on the optimal mix of securities based on the environment-friendly behavior of the corporations.
	d.	The investment function focuses on regulations applicable to a public corporation.
	e.	The investment function focuses on additional information about the procedures used to construct and report financial statements.

ANSWER:

4. Identify a true statement about the financial services provided by organizations.

	a.	Financial services organizations invest only in environmentally responsible public corporations.
	b.	Financial services include services provided by banks and insurance companies only.
	c.	Financial services organizations make investment decisions based solely on the socially responsible behavior of corporates.
	d.	Financial services organizations provide comparative cash flow positions of competing corporations to investors to help them with investment decisions.
	e.	Financial services organizations help individuals and companies determine how to invest money to achieve their financial goals.

ANSWER:

5. Financial services refer to functions provided by organizations that _____.

	a.	deal with the most efficient management of the human resources
	b.	ensure that regulations of the Sarbanes-Oxley Act are followed by public corporations
	c.	recommend the most environment friendly method of operations to a corporation
	d.	recommend the types of securities to be issued to finance plant expansions
	e.	deal with the management of money

ANSWER:

6. Which of the following functions deals with the management of money?

ANSWER:

7. Which of the following is true of financial services provided by persons working in banks, insurance companies, and brokerage firms?

	a.	Persons working in banks, insurance companies, and brokerage firms help corporations to decide the types of securities to be issued to finance plant expansion.
	b.	Persons working in banks, insurance companies, and brokerage firms help individuals and companies determine how to invest money to achieve their financial goals.
	c.	Persons working in banks, insurance companies, and brokerage firms help corporations fulfill the regulations required by the Sarbanes-Oxley Act.
	d.	Persons working in banks, insurance companies, and brokerage firms help public corporations follow environment-friendly practices.
	e.	Persons working in banks, insurance companies, and brokerage firms help corporations in framing their bylaws.

ANSWER:

8. Which of the following is true of financial institutions?

	a.	Financial institutions are the regulators of interest rates and other returns in financial markets.
	b.	Managers of financial institutions should have an understanding of factors that cause interest rates and other returns in the financial markets to rise and fall.
	c.	Financial institutions are accountable and responsible in reporting financial information for publicly-traded corporations.
	d.	Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures taken by investment corporations.
	e.	Financial institutions require public corporations to adopt socially responsible work practices.

ANSWER:

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