Introduction to Financial Management Exam Practice Tests
Course Introduction
Introduction to Financial Management offers a comprehensive overview of the fundamental principles and practices involved in managing an organization's financial resources. The course covers essential topics such as financial statement analysis, budgeting, time value of money, risk and return, capital budgeting, and the cost of capital. Emphasizing practical decision-making, students learn how to evaluate investment opportunities, assess financial health, and understand the impact of financial decisions on a businesss overall strategy. This course provides the foundational knowledge necessary for effective financial planning and control, making it vital for students pursuing careers in finance, accounting, and business management.
Recommended Textbook
Personal Finance 11th Edition by Jack R. Kapoor
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19 Chapters
2490 Verified Questions
2490 Flashcards
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Chapter 1: Personal Finance Basics and the Time Value of Money
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Increased demand for a product or service will usually result in lower prices for the item.
A)True
B)False
Answer: False
Q2) The problem of bankruptcy is associated with poor decisions in the ______________ component of financial planning.
A) sharing
B) saving
C) obtaining
D) borrowing
E) protecting
Answer: D
Q3) Higher interest rates can be caused by:
A) a lower money supply.
B) an increase in the money supply.
C) a decrease in consumer borrowing.
D) lower government spending.
E) increased saving and investing by consumers.
Answer: A
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Chapter 2: Financial Aspects of Career Planning
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) The main sources of networking include the following:
A) community organizations
B) professional associates
C) business contacts
D) all of these
E) none of these
Answer: D
Q2) Which one of the following is a professional association that can assist in career planning for a specific career area?
A) Bureau of Labor Statistics
B) Chamber of Commerce
C) Rotary Club
D) American Marketing Association
E) U.S. Department of Labor
Answer: D
Q3) Corporate culture refers to the methods used by an organization to determine the value of employee benefits.
A)True
B)False
Answer: False
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Chapter 3: Money Management Strategy: Financial
Statements and Budgeting
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is the total value of her debts?
A) $267,500
B) $105,500
C) $162,000
D) $205,500
E) None of these
Answer: B
Q2) Which one of the following should be budgeted first?
A) Variable expenses
B) Vacation expenses
C) Fixed expenses
D) Unplanned living expenses
E) Recreation expenses
Answer: C
Q3) Explain why opportunity cost is an important concept in money management. Answer: Answers will vary.
Page 5
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Chapter 4: Planning Your Tax Strategy
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Estimated quarterly tax payments must be made by people who:
A) are employed in a foreign country.
B) receive dividends.
C) work for the government.
D) do not have adequate amounts withheld from income.
E) itemize deductions.
Q2) An expense that would be included in the itemized deductions of a taxpayer is:
A) personal postage expenses.
B) life insurance premiums.
C) real estate property taxes.
D) a driver's license fee.
E) annual interest paid on credit cards.
Q3) Which of the following would result in a reduction of taxable income?
A) Portfolio income
B) Tax credits
C) Exclusions
D) Passive income
E) Earned income
Q4) Why would tax-exempt income provide greater short-term financial benefits than tax-deferred income?
Page 6
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Chapter 5: Financial Services: Savings Plans and Payment Accounts
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Which CD pays earnings based on the stock market?
A) Bump-up
B) Indexed
C) Callable
D) Global
E) Promotional
Q2) A certificate of deposit usually has:
A) high interest-rate risk.
B) low safety for savers.
C) limited liquidity.
D) a variable rate of return.
E) no minimum deposit amount.
Q3) A "free" checking account with a minimum balance of $500 has an opportunity cost of lost interest.
A)True
B)False
Q4) The more frequent the compounding, the less a person will earn on a savings account.
A)True B)False
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Chapter 6: Introduction to Consumer Credit
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) Department stores and gasoline companies are good places to obtain your first credit card.
A)True
B)False
Q2) In the 5 Cs of credit, collateral is an asset that you pledge to a financial institution to obtain a loan.
A)True
B)False
Q3) Which of the following federal consumer credit laws sets the procedures for promptly correcting billing errors?
A) Fair Credit Reporting Act
B) Truth in Lending Act
C) Equal Credit Opportunity Act
D) Fair Credit Billing Act
E) Consumer Credit Reporting Reform Act
Q4) Credit bureaus obtain their data from banks, finance companies, merchants, credit card companies, other creditors, and court records.
A)True B)False
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Chapter 7: Choosing a Source of Credit: The Costs of Credit
Alternatives
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Steve Black has two children. He is buying each of them their own TV to put in their rooms so they do not have to join the rest of the family and watch TV together. Which one of the answers best explains Gary's spending?
A) Misunderstanding or lack of communication
B) The use of money to punish
C) The expectation of instant comfort
D) Keeping up with the Joneses
E) Overindulgence of children
Q2) Sandra Jennings gets a loan from General Motors Acceptance Corporation. Which type of lending institution is this?
A) Credit union
B) Payday advance company
C) Finance company
D) Department store
E) Commercial bank
Q3) You have two choices in declaring personal bankruptcy: Chapter 7 and Chapter 13 bankruptcy.
A)True
B)False
Page 9
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Chapter 8: Consumer Purchasing Strategies and Legal Protection
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99 Flashcards
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Sample Questions
Q1) A credit purchase with 24 monthly payments of $78 and a down payment of $120 would have a total cost of:
A) $1,632.
B) $1,752.
C) $1,872.
D) $1,992.
E) $2,120.
Q2) A vehicle sold "as is" has:
A) a limited warranty.
B) no express warranty.
C) a 30-day guarantee.
D) a full warranty on parts but not labor.
E) a 90-day guarantee.
Q3) A social factor that would influence a consumer's buying decision would be the hobbies and interests they have.
A)True
B)False
Q4) What factors influence most people's buying decisions?
Q5) Explain the difference between arbitration and mediation.
Q6) Distinguish between an implied warranty and an express warranty. Page 10
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Chapter 9: The Housing Decision: Factors and Finances
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99 Flashcards
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Sample Questions
Q1) A possible disadvantage of FHA and VA mortgages can be:
A) higher debt ratios for buyers.
B) a longer processing time.
C) loans may be assumable.
D) the monthly payments can be higher than those of other mortgages.
E) the high down payment requirements.
Q2) What is the most popular type of home ownership?
A) Condominium
B) Duplex
C) Cooperative
D) Prefabricated home
E) Single family dwelling
Q3) Which home improvement is least likely to increase the value of your home?
A) Energy efficient features
B) A remodeled kitchen
C) An extra bathroom
D) A converted basement
E) An exercise room
Q4) What factors influence the type of housing a family will select?
Q5) Explain negative amortization and how such a situation can occur.
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Chapter 10: Property and Motor Vehicle Insurance
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Approximately what percent of people who rent have purchased renter's insurance?
A) 10
B) 20
C) 40
D) 60
E) 75
Q2) What type of personal liability coverage is also called a personal catastrophe policy?
A) Umbrella policy
B) Personal property floater
C) Coinsurance floater
D) Assigned risk clause
E) Medical payments coverage
Q3) The comprehensive form of homeowner's insurance includes coverage for damage due to floods.
A)True
B)False
Q4) Homeowner's insurance refers to coverage also available to condominium owners.
A)True
B)False
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Chapter 11: Health, Disability, and Long-Term Care Insurance
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) The United States has the lowest per capita medical expenditures of any industrialized country in the world.
A)True
B)False
Q2) Who sells and services Medigap insurance?
A) Federal government
B) State government
C) Both federal and state governments
D) Private insurance companies
E) Both the government and private insurance companies
Q3) Which one of the following is not a provider of health insurance?
A) Fraternal organizations
B) Trade unions
C) Government programs such as Medicare
D) Health Insurance Industry Association
E) Blue Cross and Blue Shield
Q4) Blue Cross plans provide for surgical and medical services performed by physicians.
A)True
B)False
Page 14
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Chapter 12: Life Insurance
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167 Flashcards
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Sample Questions
Q1) What percent of all applicants who apply for life insurance are found to be insurable?
A) 58
B) 68
C) 78
D) 88
E) 98
Q2) An important provision in every life insurance policy is the right to name your beneficiary.
A)True
B)False
Q3) Which statement is correct about whole life insurance?
A) It is cheaper than term life.
B) It builds up cash value.
C) The premiums increase with your age.
D) It is the best choice for most people.
E) It is the same thing as term life insurance.
Q4) Most American families face substantial loss when one spouse dies unexpectedly.
A)True
B)False
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Chapter 13: Investing Fundamentals
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125 Flashcards
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Sample Questions
Q1) What is the primary goal of asset allocation?
A) Investment income
B) Growth
C) Liquidity
D) Return
E) Risk reduction
Q2) A firm is short on cash. Which of the following would be paid first?
A) Dividends to common stock owners
B) Cash to buy shares of stock from shareholders
C) Cash to buy bonds from current bondholders
D) Interest to bond owners
E) Dividends to preferred stock owners
Q3) Standard & Poor's and Value Line are companies that would be examples of:
A) stockbrokers.
B) securities exchanges.
C) stock regulations.
D) investors' services.
E) stock underwriters.
Q4) Describe the sources of investment information investors can use to evaluate a potential investment.
Page 16
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Chapter 14: Investing in Stocks
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) James Green just bought a security which he expects will provide him with a quarterly cash payment, although that payment is not guaranteed. In fact, he expects the amount of the payment to vary over time. What type of payment is he expecting to receive?
A) Option premium
B) Interest
C) Capital gain
D) Dividend
E) Rebate
Q2) The Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Index.
A)True
B)False
Q3) A proxy is a legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individual or individuals.
A)True
B)False
Q4) Why do corporations issue stock? Why do investors buy that stock?
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Chapter 15: Investing in Bonds
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) The yield to maturity takes into account the relationship between all of the following factors, except:
A) tax rate.
B) maturity value.
C) time to maturity.
D) current price.
E) dollar amount of interest.
Q2) If overall interest rates in the economy fall, a corporate bond with a fixed interest rate will generally:
A) increase in value.
B) decrease in value.
C) remain unchanged.
D) become worthless.
E) be returned to the corporation.
Q3) Which of the following reasons explain why investors purchase bonds?
A) To provide asset allocation
B) To produce income for current financial needs
C) To match maturity dates with future financial needs
D) To have a conservative investment during an economic downturn
E) Investors purchase bonds for all of these reasons.
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Chapter 16: Investing in Mutual Funds
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Martin Campbell wants to invest in mutual funds, but is also worried about diversification. Which fund would you recommend to him?
A) Income fund
B) Long-term corporate bond fund
C) U.S. government bond fund
D) Midcap fund
E) A fund of funds
Q2) Approximately ____________ percent of all mutual funds are open-end funds.
A) 5
B) 6
C) 30
D) 72
E) 92
Q3) While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.
A)True
B)False
Q4) Why do investors purchase mutual funds instead of purchasing stocks, bonds, or other investments on their own?
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Chapter 17: Investing in Real Estate and Other Investment
Alternatives
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144 Flashcards
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Sample Questions
Q1) If you want a risk-proof real estate investment, invest in:
A) real estate investment trusts.
B) real estate limited partnerships.
C) participation certificates (PCs).
D) real estate syndicates.
E) post office buildings.
Q2) There are three types of REITs: equity REITs, mortgage REITs, and hybrid REITs.
A)True
B)False
Q3) Most REITs specialize in one property type only.
A)True
B)False
Q4) A REIT is similar to a mutual fund or an investment company, and it trades on stock exchanges or over-the-counter.
A)True
B)False
Q5) If you want a relatively risk-proof real estate investment, participation certificates (PCs) are for you.
A)True
B)False
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Chapter 18: Starting Early: Retirement Planning
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Sample Questions
Q1) Jasmine Smith owns a condo worth $240,000, a car valued at $25,000, and miscellaneous assets worth $7,500. She owes $185,000 on the condo and $15,000 on the car and has no other debts. Her retirement account, in which she is fully vested, contains $27,500 in mutual funds. She is insured with a $500,000 term life insurance policy. What is her net worth?
A) $92,500
B) $100,000
C) $115,000
D) $592,500
E) $600,000
Q2) Which one of the following expenditures for retirees is most likely to increase?
A) Health care
B) Federal income taxes
C) Clothing expenses
D) Work-related expenses
E) State income taxes
Q3) The shift to defined-contribution plans has forced employees to take more responsibility for their retirement.
A)True
B)False
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Chapter 19: Estate Planning
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Sample Questions
Q1) Joseph Vu has assets worth $1,200,000. He has written a legal document that specifies that these assets be divided equally between his wife and his two sons upon his death. What is this legal document?
A) Estate
B) Will
C) Trust
D) Probate
E) Liabilities
Q2) A trust established by your will that becomes effective upon your death is called a(n) ____________ trust.
A) testamentary
B) living
C) revocable
D) irrevocable
E) insurance
Q3) The stated dollar amount will allow you to pass on to your spouse any amount that satisfies your family objectives.
A)True
B)False
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Page 22