BUSINESS FINANCE
SUMMATIVE ASSESSMENT # 1
Name: _____________________________ Score :__________
Strand:_____________________________ Date:____________
Directions: Read carefully each item. Use a separate sheet for your answers, write only the letter of the best
answer for each item.
1. What do you call the owners of a corporation?
A. Proprietors B. Stockholders C. Partners D. Merchandisers
2. “Shareholder wealth” in a firm is represented by:
A. the number of people employed in the firm
B. the book value of the firm's assets less the book value of its liabilities
C. the amount of salary paid to its employees
D. the market price per share of the firm's common stock
3. The long-run objective of financial management is to:
A. maximize earnings per share
B. maximize the value of the firm's common stock
C. maximize return on investment
D. maximize market share
4. The focal point of financial management in a firm is:
A. the number and types of products or services provided by the firm
B. the minimization of the amount of taxes paid by the firm
C. the creation of value for shareholders
D. the profits earned by the firm
5. The decision function of financial management can be broken down into the decisions.
A. financing and investment
B. investment, financing, and asset management
C. financing and dividend
D. capital budgeting, cash management, and credit management
6. A company's ___________ are potentially the most effective instrument of good corporate governance.
A. common stock shareholders B. board of directors
C. top executive officers D. stakeholder
7. Who are the elected group of individuals that represent shareholder?
A. common stock shareholders B. board of directors
C. top executive officers D. stakeholders
8. What kind of business is BEST described by these statements? I am the only owner of my business. I take
all the risks of doing business. I keep all the profits.
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative
9. A form of business organization that is authorized to act as a legal entity regardless of the number of
owners.
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative
10. Owned by many people - stockholders, but treated by the law as one person
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative
11. These are organized forums in which the suppliers and users of various types of funds can make transactions
directly.
A. Financial Markets B. Financial Instruments
C. Financial Institution D. Financial System
12. These are intermediaries that channel the savings of individuals, business, and governments into loans or
investment.
A. Financial Markets B. Financial Instruments
C. Financial Institution D. Financial System
13. It is a real or a virtual document representing a legal agreement involving monetary value.
A. Financial Markets B. Financial Instruments
C. Financial Institution D. Financial System
14. The key participants in financial transactions are individuals, businesses, and governments. Individuals are net
_______ of funds, and businesses are net _____of funds.
A. suppliers; users B. purchasers; sellers
C. users; suppliers D. users; providers
15. Which of the following is not a service provided by financial institutions?
A. Buying the businesses of customers
B. Investing customers’ savings in stocks and bonds
C. Paying savers’ interest on deposited funds
D. Lending money to customers
16. Which of the following is not a financial institution?
A. A pension fund B. A newspaper publisher
C. A commercial bank D. An insurance company
17. A is a type of financial intermediary that pools savings of individuals and makes them available to business
and government users. Funds are obtained through the sale of shares.
A. mutual fund B. savings and loans
C. savings bank D. credit union
18. It is a market that enables suppliers and users of long-term funds to make transactions.
A. Money Market B. Secondary Market
C. Money Market D. Capital Market
19. It is a financial relationship created between suppliers and users of short-term funds.
A. Private Placement B. Secondary Market
C. Money Market D. Capital Market
20. It is a financial market in which preowned securities (those that are not new issues) are traded.
A. Private Placement B. Secondary Market
C. Money Market D. Capital Market
