1776 Words Apr 7th, 2011 8 Pages
1. A financial analyst is responsible for maintaining and controlling the firm’s daily cash balances. Frequently manages the firm’s short‑term investments and coordinates short‑term borrowing and banking relationships. FALSE

2. Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government. TRUE

3. Financial services are concerned with the duties of the financial manager. FALSE

4. Financial managers actively manage the financial affairs of many types of business—financial and non-financial, private and public, for-profit and not-for-profit. False??

5. In partnerships, owners have unlimited
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28. Liquidity preference theory suggests that for any given issuer, long‑term interest rates tend to be higher than short‑term rates due to the lower liquidity and higher responsiveness to general interest rate movements of longer‑term securities; causes the yield curve to be upward‑sloping. TRUE

Chapter 7

29. Holders of equity have claims on both income and assets that are secondary to the claims of creditors. TRUE

30. The tax deductibility of interest lowers the cost of debt financing, thereby causing the cost of debt financing to be lower than the cost of equity financing. TRUE

31. Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any interest to outstanding bonds. FALSE

32. Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid in additional shares of preferred stock prior to the payment of dividends to common stockholders. False???

33. Preferred stock is often considered a quasi‑debt since it yields a fixed periodic payment. TRUE

34. The amount of the claim of preferred stockholders in liquidation is normally equal to the market value of the preferred stock. False???

35. Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be

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