BUS-115 Introduction to BusinessWeek 14QuestionsPick the one best answer for the following questions.Mark your answers on a Scantron answer sheet (erase all stray marks)Chapter 20 Questions1. True or False? Speculative production is an example of a long-term financial need.2. True or False? A budget is a financial statement that projects income and/or expenditures over a specified future period.3. True or False? Trade credit is the least popular form of short-term financing.4. True or False? An investment banking firm accepts deposits like commercial banks and savings and loan associations.5. True or False? Typically, long-term loans are repaid in three to seven years.6. A __________ budget estimates a firm’s expenditures for major assets.a. cash b. capital c. long-term needs d. traditional e. zero-7. The prime interest rate is thea. highest rate charged by a commercial bank.b. average rate charged by a commercial bank.c. lowest rate charged by a commercial bank.d. rate charged by the Federal Reserve Bank for business loans.e. rate charged by the SEC for business loans.Page 1 of 68. The most basic form of corporate ownership isa. long-term equity loans.b. SEC qualified stock.c. preferred stock.d. common stock.e. corporate bonds.9. Which of the following would be paid first?a. Dividends paid on common stockb. Dividends paid on preferred stockc. Interest on corporate bondsd. Bonuses paid to stockholderse. Contributions to retained earnings10. The use of borrowed funds to increase the return on owners’ equity isa. equity capital.b. Fed financing.c. common stock financing.d. financial suicide.e. financial leverage.11. True or False? Financial planning begins with establishing a set of valid goals and objectives.12. True or False? Debt capital is financing provided by the owner or owners of the business.13. True or False? Commercial paper is a short-term promissory note issued by a small business.14. True or False? When compared to other forms of short-term financing, factoring is relatively inexpensive.15. True or False? An IPO occurs when a corporation sells common stock to the general public for the first time.16. A budgeting approach in which every expense in every budget must bejustified is referred to as __________ budgeting.a. zero-baseb. financial-basedc. traditionald. TQMe. efficient-market17. The most popular and inexpensive form of short-term financing isPage 2 of 6a. factoring.b. promissory notes.c. commercial paper.d. unsecured bank notes.e. trade credit.18. Selling stock a. is a form of financing that must be repaid at maturity.b. requires the payment of interest every three months.c. is a form of equity financing.d. is a form of debt financing.e. is a form of financing that has low flotation costs.19. Which of the following would be allowed to elect a corporation’s board of directors?a. Corporate managementb. Common stockholdersc. Corporate bondholdersd. Long-term lenderse. Suppliers20. A __________ is a bond backed only by the reputation of the issuing corporation.a. registered bondb. convertible bondc. mortgage bondd. debenture bonde. serial bondPage 3 of 6Chapter 21 QuestionsTurn your Scantron answer sheet over and mark your answers on the BACK - starting with 51Pick the one best answer…51. True or False? Personal investment is the use of your personal funds to earn a financial return.52. True or False? The primary market is a market for existing financial securities that are traded between investors on an organized exchange.53. True or False? The Securities Investor Protection Act established the Securities and Exchange Commission.54. True or False? The basic idea behind asset allocation is to lessen investment risk.55. True or False? Over many years, managed funds have outperformed index funds.56. The ease with which an investment can be converted into cash is referred to asa. income.b. cash factor.c. margin transaction.d. liquidity.e. cash mobility factor.57. An investment banking firm generally charges a fee of __________ percent.a. less than 5b. 2 to 10c. 5 to 15d. 2 to 20e. over 20Page 4 of 658. A __________ order is an order to buy or sell a security at the current market price.a. Discretionary b. Limit c. Market d. Secured e. Speculative 59. Which of the following would be considered the most speculative investment?a. Commoditiesb. Municipal bondsc. Corporate bondsd. Preferred stockse. Common stocks60. Which of the following would be considered a professional investors’ service?a. Fortune Advisorb. Morningstarc. SECd. Value Indexe. Business Week Online61. True or False? For an investment, the potential return should be directly related to the assumed risk.62. True or False? Nasdaq is regulated by the National Association of Securities Dealers.63. True or False? The time your investments have to work for you and your age should not be considered when choosing a conservative investment.64. True or False? Treasury bills are issued in $1,000 units with a maturity of more than one year but not more than ten years.65. True or False? Most investment information available on the Internet is too expensive for the small investor.Page 5 of 666. A 24-year-old single individual would most likely choose investments that offera. safety.b. income.c. growth.d. dividend yields.e. liquidity.67. A(n) __________ is the first time that a company sells stocks.a. margin offeringb. initial public offeringc. investment banker offerd. secured transactione. liquidity68. The SEC was created by thea. Securities Act of 1933.b. Securities Exchange Act of 1934.c. Investment Company Act of 1940.d. Investment Advisors Act of 1940.e. Sarbanes-Oxley Act of 2002.69. Which of the following statements is true?a. Load funds outperform no-load funds.b. Management fees range from 4 to 7 percent a year.c. 12b-1 fees are approximately 1 percent of the fund’s assets.d. Generally, managed funds outperform index funds.e. Small-cap funds invest in companies that issue corporate bonds that have little risk.70. Which of the following would most likely be considered a high-risk investment technique?a. Unsecured bank transactionsb. Corporate bondsc. Real estated. Common stockse. Margin transactionsPage 6 of