Assessed Quiz 1

7/16/2019 Assessed Quiz 1
 ▶ FM202_201803 ▶ Assessed Quiz 1
Started on Thursday, 9 August 2018, 9:41 PM

State Finished
Completed on Thursday, 9 August 2018, 10:33 PM
Time taken 51 mins 59 secs
Mark 14.0 out of 25.0 (56%)
Question 1
Correct
Mark 1.0 out of 1.0
The amount of compensation an investor should expect for accepting

unsystematic risk:
Select one:
a. is equal to beta multiplied by the market rate of return.
b. is equal to the market risk premium.
c. varies indirectly with the beta of the firm.
d. is $0.

The correct answer is: is $0.
https://elearn.usp.ac.fj/mod/quiz/review.php?attempt=304421&cmid=191250 1/15
Question 2
Incorrect
Mark 0.0 out of 1.0

Which one of the following is the best definition of the term 'expected
return' as it applies to the concept of risk and return?
Select one:
a. The guaranteed return on a short-term treasury security that

will be earned in the future.
b. The return on a risky asset which is expected in the future.
c. The difference between the expected return on a risky asset

and the certain return on a risk-free asset.
d. The certain return on a risk-free asset that is going to be

earned in the future.
The correct answer is: The return on a risky asset which is expected in the
future.
Question 3
Incorrect
Mark 0.0 out of 1.0

Why might a potential small enterprise owner-manager consider

franchising as an option for entering small enterprise?
Select one:
a. Since most franchisees are chosen after a screening process,

failure rates for franchises are often lower than for other small
enterprises.
b. All of the above.
c. An association with a well-known franchise may help in raising

finance.
d. It provides a ready-made business with tried operating

methods and well-developed training and support facilities.
The correct answer is: All of the above.
Question 4
Correct
Mark 1.0 out of 1.0
Why should financial management be so important to the wellbeing of a

small enterprise?
Select one:
a. All of the above.


b. Because without appropriate management of financial matters
a business will not be viable.
c. To avoid liquidity stress.
d. To avaoid bankruptcy.
The correct answer is: All of the above.
Question 5
Correct
Mark 1.0 out of 1.0

Which of the following may be an indication of growth in a small

business?
Select one:
a. Increase in sales turnover.


b. Decrease in net income.
c. Decrease in number of employees.
d. All of the above.
The correct answer is: Increase in sales turnover.
Question 6
Correct
Mark 1.0 out of 1.0
The CAPM attempts to:
Select one:
a. Establish a relationship between unsystematic risk and return.
b. Establish a relationship between systematic risk and return.


c. Establish a value for beta.
d. Establish a value for the risk free rate.
The correct answer is: Establish a relationship between systematic risk and
return.
Question 7
Incorrect
Mark 0.0 out of 1.0

Which of the following is not one of the main ways of leaving a small
enterprise?
Select one:
a. Pass on your shares to your heir incase of a family business.
b. Sell your sole trading business to a competitor.
c. Selling your franchise business to a third party before

expiration of contract.
d. Stock market floatation.
The correct answer is: Selling your franchise business to a third party before
expiration of contract.
Question 8
Correct
Mark 1.0 out of 1.0
Which one of the below is NOT a likely factor that may give rise to
differences in capital structures between SMEs?
Select one:
a. Desire to control on the part of the owners.
b. Relative risk of the business.
c. The number of employees.


d. Ability to offer assets as security for debt.
The correct answer is: The number of employees.
Question 9
Correct
Mark 1.0 out of 1.0

The main functional roles that have been ascribed to an entrepreneur

are:
Select one:
a. Innovator and arbitrageur.
b. None of the above.
c. Owner and manager.
d. Coordinator, bearer of uncertainty, innovator &

arbitrageur.

The correct answer is: Coordinator, bearer of uncertainty, innovator &

arbitrageur.
Question 10
Incorrect
Mark 0.0 out of 1.0
Which one of the following represents a risk involved in franchising from

the point of view of the franchisor?
Select one:
a. Franchisor takes over the running of a particular outlet and

employs a manager.
b. None of the above.
c. Incentives to encourage compliant behaviour and terminate

contracts with unsatisfactory franchisees.
d. Franchisee will free ride or shirk or not conform with the rules
concerning prices.
The correct answer is: Franchisee will free ride or shirk or not conform with
the rules concerning prices.
Question 11
Incorrect
Mark 0.0 out of 1.0

Fixed Asset Management is concerned with
Select one:
a. Both A and B.
b. The management of assets and liabilities which provide

economic benefits to the firm across one financial period.
c. The management of assets, liabilities and equities which

provide economic benefits to the firm across two or more financial
periods.
d. The management of assets which provide economic benefits to

the firm across two or more financial periods.
The correct answer is: The management of assets which provide economic
benefits to the firm across two or more financial periods.
Question 12
Incorrect
Mark 0.0 out of 1.0

Which one of the following statement below describes money market

hedge?
Select one:
a. It is a contract that gives its holder the right to buy or sell, on

or by a specified date, an amount of a currency at a predetermined
exchange rate.
b. It is a transaction in which two counterparties exchange

specific amounts of two different currencies at the outset and repay
over time according to a predetermined rule.
c. The basic idea is to avoid future exchange rate uncertainty by

making the exchange at today's spot rate instead.
d. If a currency is appreciating, pay those bills denominated in

that currency early; let customers in that country pay late as long
as they are paying in that currency.
The correct answer is: The basic idea is to avoid future exchange rate
uncertainty by making the exchange at today's spot rate instead.
Question 13
Correct
Mark 1.0 out of 1.0

The pecking order theory suggests that less profitable firms borrow
more because:
Select one:
a. Debt issues are good omens.
b. They have insufficient internal funds.


c. Equity issues are more expensive.
d. Leverage is preferred over raising funds internally.
The correct answer is: They have insufficient internal funds.
Question 14
Correct
Mark 1.0 out of 1.0
Which of the agency problem would be more serious for a small

enterprise when the only owner is the only manager?
Select one:
a. Agency problem between owner and manager.
b. Agency problem between bondholders and shareholders.
c. Agency problem between manager and bondholders.
d. Agency problem between owner and outside stakeholders.


The correct answer is: Agency problem between owner and outside
stakeholders.
Question 15
Incorrect
Mark 0.0 out of 1.0

For small business there are relatively less agency relationships,

because in most cases:
Select one:
a. The SME is listed.
b. All of the above.


c. There are hired managers who manage the business.
d. There are separation of ownership and control.
The correct answers are: The SME is listed., There are separation of ownership
and control., There are hired managers who manage the business., All of the
above.
Question 16
Incorrect
Mark 0.0 out of 1.0
Which one of the following is a correct statement regarding a firm's

weighted average cost of capital (WACC)?
Select one:
a. A reduction in the risk level of a firm will tend to increase the

firm's WACC.
b. The WACC can be used as the required return for all new
projects with similar risk to that of the existing firm.
c. The WACC will decrease when the tax rate decreases for all
firms that utilise debt financing.
The correct answer is: The WACC can be used as the required return for all
new projects with similar risk to that of the existing firm.
Question 17
Correct
Mark 1.0 out of 1.0

What is the Small Firm Effect?
Select one:
a. Represents a challenge to the ability of the CAPM to adequately

capture risk-return relationships.

b. A situation in which agents have information about the
company that is not known to principals.
c. The ability of the small firms to easily calculate its risk.
d. Both A & B.
The correct answer is: Represents a challenge to the ability of the CAPM to
adequately capture risk-return relationships.
Question 18
Correct
Mark 1.0 out of 1.0
The slope of the security market line is equal to:
Select one:
a. the risk-free rate plus the market risk premium.
b. the market risk premium.


c. the risk-free rate of return, plus beta times the market risk
premium.
d. one minus the risk-free rate of return.
The correct answer is: the market risk premium.
Question 19
Incorrect
Mark 0.0 out of 1.0

Which of the following best describes bootstrapping:
Select one:
a. The owner records the money borrowed from a relative as cash

instead of liability.
b. The owner keeps the inventory at minimum level to minimize

storage cost.
c. The owner brings his home computer to his small business for
office use.
d. All of the above.
The correct answer is: The owner brings his home computer to his small
business for office use.
Question 20
Correct
Mark 1.0 out of 1.0
A SME owner-manager should receive a return premium for his or her

investment of financial and human capital because:
Select one:
a. The lack of mobility (ability to sell ownership) poses an

additional risk .
b. Both A and B.

c. Owner-manager has possibly foregone the return protection of
a diversified folio of investment and carries greater risks for which
compensation is appropriate.
d. The owner-manager is not educated and illiterate.
The correct answer is: Both A and B.
Question 21
Correct
Mark 1.0 out of 1.0

One of the factors which contributes to high incidence of weak working

capital management found in small enterprises is:
Select one:
a. Most information to assist with working capital management is

available or is adequate.
b. Most do not forecast cash flows.


c. Almost all small businesses take advantage of trade discounts
which are offered.
d. All of the above.
The correct answer is: Most do not forecast cash flows.
Question 22
Correct
Mark 1.0 out of 1.0
Several barriers to small enterprises moving to electronic systems and

information exchange includes:
Select one:
a. Suitable software standards.
b. Abundance of business reasons to participate.
c. Lack of knowledge, interest, skill or time.


d. Affordable systems and trainings.
The correct answer is: Lack of knowledge, interest, skill or time.
Question 23
Incorrect
Mark 0.0 out of 1.0

Which one of the following is not a perfect capital market assumption

invoked in the development of modern finance theory?
Select one:
a. There are no availability restrictions.
b. Unequal access for all participants to the capital market.
c. Liquidation of individual or business assets is costless.
d. There are no transaction costs.
The correct answer is: Unequal access for all participants to the capital
market.
Question 24
Incorrect
Mark 0.0 out of 1.0
One of the features most important in distinguishing small enterprises

from their larger counterparts is:
Select one:
a. SME management are skillful and versatile.
b. Limited liability is present or effective in a SME.
c. SME owners have diversified personal portfolios.
d. SMEs experience high costs of capital market imperfections.
The correct answer is: SMEs experience high costs of capital market
imperfections.
Question 25
Correct
Mark 1.0 out of 1.0

The internal rate of return is:
Select one:
a. The rate of return at which the cash inflow and cash outflow of
an investment is zero.

b. The sum of present value of cash inflows less cash outflows.
c. All of the above.
d. The discount rate at which the NPV is equal to one.
The correct answer is: The rate of return at which the cash inflow and cash
outflow of an investment is zero.
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7/16/2019 Assessed Quiz 1

 ▶ FM202_201803 ▶ Assessed Quiz 1

Started on Thursday, 9 August 2018, 9:41 PM

Mark 1.0 out of 1.0

The amount of compensation an investor should expect for accepting

a. is equal to beta multiplied by the market rate of return.

b. is equal to the market risk premium.

c. varies indirectly with the beta of the firm.

The correct answer is: is $0.

Mark 0.0 out of 1.0

a. The guaranteed return on a short-term treasury security that

b. The return on a risky asset which is expected in the future.

c. The difference between the expected return on a risky asset

d. The certain return on a risk-free asset that is going to be

Mark 0.0 out of 1.0

Why might a potential small enterprise owner-manager consider

a. Since most franchisees are chosen after a screening process,

b. All of the above.

c. An association with a well-known franchise may help in raising

d. It provides a ready-made business with tried operating

The correct answer is: All of the above.

Mark 1.0 out of 1.0

Why should financial management be so important to the wellbeing of a

a. All of the above.

c. To avoid liquidity stress.

The correct answer is: All of the above.

Mark 1.0 out of 1.0

Which of the following may be an indication of growth in a small

a. Increase in sales turnover.

c. Decrease in number of employees.

d. All of the above.

The correct answer is: Increase in sales turnover.

Mark 1.0 out of 1.0

The CAPM attempts to:

a. Establish a relationship between unsystematic risk and return.

b. Establish a relationship between systematic risk and return.

d. Establish a value for the risk free rate.

Mark 0.0 out of 1.0

a. Pass on your shares to your heir incase of a family business.

b. Sell your sole trading business to a competitor.

c. Selling your franchise business to a third party before

d. Stock market floatation.

Mark 1.0 out of 1.0

a. Desire to control on the part of the owners.

b. Relative risk of the business.

c. The number of employees.

The correct answer is: The number of employees.

Mark 1.0 out of 1.0

The main functional roles that have been ascribed to an entrepreneur

a. Innovator and arbitrageur.

b. None of the above.

c. Owner and manager.

d. Coordinator, bearer of uncertainty, innovator &amp;

The correct answer is: Coordinator, bearer of uncertainty, innovator &amp;

Mark 0.0 out of 1.0

Which one of the following represents a risk involved in franchising from

a. Franchisor takes over the running of a particular outlet and

b. None of the above.

c. Incentives to encourage compliant behaviour and terminate

d. Coordinator, bearer of uncertainty, innovator &

The correct answer is: Coordinator, bearer of uncertainty, innovator &