Multiple choice

1. Which of the following is true regarding an initial public offering?               

a.     The corporation gets proceeds from the investor.

b.     Investors get proceeds from other investors.

c.     The security is sold for the first time to the public.

d.     Both a and c.

e.     All of the above.

2. Which of the following is not a principle of basic financial management?               

a.     Risk/return tradeoff

b.     Incremental cash flow counts

c.     Efficient capital markets

d.     Profit is king

3. Which of the following statements is false?                         

a.     All risk can be diversified away.

b.     Measuring a project’s risk is difficult.

c.     Projects should focus on incremental cash flows.

d.      Taxes play a significant role in project analysis.

4. Difficulty in finding profitable projects is due to:                         

a.     social responsibility.

b.     competitive markets.

c.     ethical dilemmas.

d.     opportunity costs.