Basic Financial Management
Mock Exam
Course Introduction
Basic Financial Management introduces students to the fundamental concepts and principles of managing financial resources within an organization. The course covers key topics such as financial statement analysis, time value of money, capital budgeting, risk and return, financial planning, and working capital management. Students will learn how to make informed financial decisions, assess investment opportunities, and understand the impact of financial decisions on overall business strategy. Through case studies and practical examples, the course emphasizes the importance of financial management in achieving organizational goals and ensuring long-term sustainability.
Recommended Textbook
Personal Finance 4 4th Edition by Lawrence J. Gitman
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15 Chapters
2587 Verified Questions
2587 Flashcards
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Page 2
Chapter 1: Understanding the Financial Planning Process
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) [Disney stock | Your car] would be considered a financial asset. Answer: A
Q2) Mutual funds are examples of financial assets. A)True
B)False
Answer: True
Q3) Government controls consumers and businesses by regulation and taxation. A)True
B)False
Answer: True
Q4) During the expansion phase of a business cycle,the unemployment rate will [increase | decrease].
Answer: B
Q5) The need for financial planning declines as your income increases. A)True
B)False
Answer: False
Q6) [Tax | Liability and insurance] planning is introduced early in the life cycle. Answer: B
Page 3
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Chapter 2: Using Financial Statements and Budgets
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Investment assets include items such as boats or automobiles.
A)True
B)False
Answer: False
Q2) Kathy purchased new furniture for $10,000.She put $1,000 down and financed $9,000.She will pay $350 per month until the loan is paid off.Which of the following is true of the value of furniture Kathy would record on her personal balance sheet?
A) The furniture should be recorded as an asset of $10,000 on Kathy's balance sheet.
B) The $9,000 is entered as a liability on Kathy's balance sheet.
C) The furniture should be recorded as a $1,000 expenditure on Kathy's balance sheet.
D) The $350 payments are expenditures on Kathy's income and expenditure statement.
E) All are correct except c
Answer: E
Q3) Jean and Jim have liquid assets of $3,600 and other assets of $42,800.Their total liabilities equal $26,000.What is their net worth?
Answer: 11ea84e6_2e09_572e_abcc_8b41f1571910_TB3853_00_TB3853_00
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Chapter 3: Preparing Your Taxes
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) Your marital status will affect the amount of social security you must pay in a year.
A)True
B)False
Answer: False
Q2) Your average tax rate is your:
A) adjusted gross income divided by tax withheld.
B) adjusted gross income divided by tax liability.
C) tax liability divided by taxable income.
D) taxable income divided by tax withheld.
E) gross income divided by tax refund.
Answer: C
Q3) Federal income taxes paid can be deducted in the following year.
A)True
B)False
Answer: False
Q4) The tax year begins at April 16 and ends at April 15,the usual filing deadline.
A)True
B)False Answer: False
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Chapter 4: Managing Your Cash and Savings
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) The FDIC insures each [depositor | account] up to a stated maximum dollar amount at any given financial institution.
Q2) Natalie is faced with two savings choices: making a single deposit of $5,000 or making five annual deposits of $1,000.The interest rate on both is 4%,compounded monthly.The [lump sum deposit | annual deposits] plan will result in a higher balance at the end of five years.
Q3) Harry just received $2,000 for graduation.He plans on investing this money for five years at 8% compounded annually.If he accomplishes this,Harry will have in an ending balance of: (Use time value tables or financial calculator.Select the closest answer.)
A) $2,160.
B) $2,520.
C) $2,608.
D) $2,938.
E) $3162.
Q4) Today the differences between a commercial bank and a savings and loan association (S&L)are [minor | major].
Q5) It costs financial institutions more for their customers to perform [ATM transactions | Internet transactions].
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Chapter 5: Making Automobile and Housing Decisions
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198 Verified Questions
198 Flashcards
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Sample Questions
Q1) When you receive title to an individual unit and joint ownership of any common areas and facilities,you have purchased a:
A) single family home.
B) cooperative.
C) condominium.
D) row house.
E) mobile home.
Q2) The term condominium refers to a style of architecture.
A)True
B)False
Q3) The price of the car you are leasing is called the:
A) money factor.
B) capitalized cost.
C) residual value.
D) purchase option.
E) capitalized cost reduction.
Q4) If you qualify,you might be able to buy a home with no down payment with [an FHA | a VA] loan.
Q5) There is direct ownership of your living space in a [condo | co-op apartment].
Page 7
Q6) The term condominium/townhome refers to a type of [architecture | ownership].
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Chapter 6: Using Credit
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) With open account credit,one can often avoid interest charges if:
A) the account balance is paid in full every month.
B) at least half the account balance is paid every month.
C) the minimum payment is made every month.
D) the account is a revolving credit account.
E) the balance is below the credit limit.
Q2) A credit scoring system might assign points according to your annual income and [gender | age].
Q3) Open account credit is characterized by:
A) no credit limit.
B) a monthly credit statement.
C) annual billing.
D) minimum balance requirements.
E) none of the above
Q4) The grace period on a credit card starts on the billing date and ends on the date the lender should receive the payment.
A)True
B)False
Q5) Most of your debts would be totally discharged underChapter [7 | 13] of the federal bankruptcy law.
8
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Chapter 7: Using Consumer Loans
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147 Flashcards
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Sample Questions
Q1) If your installment loan has a variable interest rate:
A) the rate will remain the same over the life of the loan.
B) the amount you borrowed will change with interest rates.
C) you cannot accurately predict the total interest you will pay on the loan.
D) you can calculate the total interest you will pay on the loan.
E) your monthly loan payment will remain the same for all the months..
Q2) Sales finance companies commonly purchase the retail installment contracts of businesses that sell big-ticket items such as automobiles,furniture,and appliances.
A)True
B)False
Q3) The majority of consumer loans are made with [fixed | variable] interest rates.
Q4) Collateral is an item of value used to secure the principal portion of a loan.
A)True
B)False
Q5) The primary type of loan made by a savings and loan association is the long-term installment loan used for the purchase of a home.
A)True
B)False
Q6) Consolidation loans are generally [inexpensive | expensive].
Page 9
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Chapter 8: Insuring Your Life
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) The multiple-of-earnings approach to evaluate life insurance needs is simplistic but can be unreliable.
A)True B)False
Q2) Because premiums get higher as you age,it is probably advisable for you to buy life insurance at age 20 to save money whether or not you need the insurance then.
A)True B)False
Q3) Jonathan Blake purchased an insurance policy of $150,000,and nominated his wife,Rebecca Blake as his primary beneficiary,and his son,Nathan Blake as his secondary beneficiary.Assuming that Rebecca and Nathan survive Jonathan,the benefit of the insurance shall be received by [Rebecca Blake | Nathan Blake].
Q4) If you have $300 per year available for life insurance,you could get higher life insurance protection with a [continuous | limited payment] policy.
Q5) The life insurance policy that clearly separates the protection and savings elements is a [whole life | universal life].
Q6) Insurance is a tool that can lessen [economic | accident] risk.
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Page 10
Chapter 9: Insuring Your Health
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) When trying to determine your disability income needs,you should consider available sick leave,income needs,and:
A) social security benefits.
B) surgical expense protection.
C) Medicare.
D) life insurance.
E) income tax bracket.
Q2) Surgical expense insurance would pay for cosmetic surgery [| to reduce the size of your nose | only if deemed a medical necessity].
Q3) Disability occurs only when someone is completely incapable of returning to work.
A)True
B)False
Q4) Disability income benefits under social security will be paid as long as you cannot perform the duties of the job you were holding when the disability began.
A)True
B)False
Q5) Premiums for workers compensation are paid by the [employees | employers].
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Chapter 10: Protecting Your Property
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) Negligent acts must be [intentional | unintentional] in order to be insured.
Q2) If you have two insurance policies on the same property,the _____ clause explains how the two insurance companies will share the loss.
A) principle of indemnity.
B) co-insurance clause.
C) other-insurance clause.
D) companies' insurable interest.
E) principle of subrogation.
Q3) Property inventories are important to identify insurance needs and to substantiate claims.
A)True
B)False
Q4) Which of the following will be covered in homeowners' insurance?
A) The medical costs to a meter-reader who was bitten by your pet.
B) Your attached garage destroyed by Hurricane Ivan.
C) Your new Pontiac Transport Mini-Van parked inside the garage.
D) a,b,and c
E) a and b
Q5) Section I of a homeowner's insurance policy covers [personal liability | medical payments |].
Page 12
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Chapter 11: Investment Planning
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) Long-term securities are traded only in the primary markets.
A)True
B)False
Q2) All OTC stocks are part of NASDAQ.
A)True
B)False
Q3) A portfolio is a collection of investment assets assembled to meet your investment objectives.
A)True
B)False
Q4) A(n) [underwriting | prospectus] is a document made available to prospective security buyers that describes the firm and a new security issue.
Q5) The single most important reason for investing is for retirement.
A)True
B)False
Q6) A systematic investment routine involves investing similar sums in regular intervals. A)True B)False
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Chapter 12: Investing in Stocks and Bonds
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) Common stockholders usually receive one vote per [person | share].
Q2) You received a cash dividend from your stock investment this year.This is taxable income.
A)True
B)False
Q3) When a bond is sold between coupon payment dates,the buyer pays the seller for the accrued interest.
A)True
B)False
Q4) Total investment return can be approximated using the current yield.
A)True
B)False
Q5) Market risk is often measured using:
A) the price/earnings ratio.
B) the dividend yield.
C) alpha.
D) beta.
E) none of these
Q6) By holding stock in 5 companies,you are reducing [market | business] risk.
Q7) A growth stock would be expected to pay a [high | low] level of dividends.
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Chapter 13: Investing in Mutual Funds
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Balanced funds invest in a proportionate amount of common and preferred stocks and bonds.
A)True
B)False
Q2) A(n)_____ sells fund shares,either directly to the public or through certain authorized dealers.
A) investment advisor
B) custodian
C) transfer agent
D) distributor
E) money manager
Q3) The cost of buying shares in a load fund is [higher | lower] compared to the commissions charged for buying stock.
Q4) Index funds have provided competitive rates of return because:
A) their costs are lower than other stock funds.
B) it is difficult to outperform the market.
C) they have very low turnover rates.
D) they are tax efficient.
E) all of the above
Q5) A [global | international] fund invest exclusively in foreign securities.
Page 15
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Chapter 14: Planning for Retirement
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208 Flashcards
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Sample Questions
Q1) The cost of a life annuity is greater for females than it is for males.
A)True
B)False
Q2) The first step in retirement planning is to [set retirement goals | decide how much money you can afford to set aside for retirement].
Q3) Home Appliance Warehouse,Inc.would like to set up a retirement plan for its employees that encourage employees to save for their own retirement.The company is willing to match employee contributions.Which of the following plans would be appropriate in this situation?
A) Cash balance plan
B) 403(b)plan
C) 457 plan
D) 401(k)plan
E) b,c,and d
Q4) If your employer matches your 401(k)contributions,you should contribute [the maximum allowed for tax deferrable | at least the amount matched by your employer].
Q5) The income base on which Social Security tax is computed [increases each year | remains the same for long periods of time].
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Chapter 15: Preserving Your Estate
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) The testator of a will always receives property from the will.
A)True
B)False
Q2) Funds from the [Minor's Section 2503(c)| Crummey] trust must be distributed by the time the beneficiary turns 21.
Q3) A first will is revoked if a second legitimate will is created.
A)True
B)False
Q4) Using a trust can help shield an estate from using improper vehicles of transfer.
A)True
B)False
Q5) Which of the following best describes a situation of intestacy?
A) Having insufficient medical insurance during a period of illness
B) Dying without heirs
C) Being physically challenged
D) Dying without a valid will
E) Dying without any probate property
Q6) If a gift tax has to be paid,the [giver | recipient] of the gift will pay it.
Q7) Your estate is more likely to be subject to [state | federal] death taxes.
Page 17
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