Exam 1 Review Pt 2 (Conceptual Portion)

Question 1

1. Shareholder A sold 500 shares of Microsoft stock on the New York Stock Exchange. This transaction:

A. Took place in the primary market.

B. Occurred in a dealer market.

C. Was facilitated in the secondary market.

D. Involved a proxy.

E. Was a private placement.

Answer 1

C. Was facilitated in the secondary market.

Question 2

2. Which one of the following is a capital budgeting decision?
   A. Determining how many shares of stock to issue.

B. Deciding whether or not to purchase a new machine for the production line.

C. Deciding how to refinance a debt issue that is maturing.

D. Determining how much inventory to keep on hand.

E. Determining how much money should be kept in the checking account.

Answer 2

B. Deciding whether or not to purchase a new machine for the production line.

Question 3

“BLANK” budgeting is the process that a business uses to determine which proposed fixed asset purchases it should accept, and which should be declined. This process is used to create a quantitative view of each proposed fixed asset investment, thereby giving a rational basis for making a judgment.

Answer 3

Capital

Question 4

10. Which of the following is (are) included in the market value of a firm but is (are) excluded from the firm's book value? 
I. Value of management skills.
II. Long Term Assets
III. Value of the firm's reputation.
IV. Growth Opportunities.

A. I only.

B. II only.

C. III and IV only.

D. I, II, and III only.

E. I, III, and IV only.

Answer 4

E. I, III, and IV only.