7/16/2019 Assessed Quiz 2

 ▶ FM202_201803 ▶ Assessed Quiz 2

Started on Friday, 5 October 2018, 10:20 PM

State Finished
Completed on Friday, 5 October 2018, 10:31 PM
Time taken 11 mins 13 secs
Mark 13.00 out of 15.00 (87%)

Question 1
Correct

Mark 1.00 out of 1.00

Ownership in a family business usually comes free of charge when

shares are passed from one generation to another. This provides
benefits to the recipients since no finance is required and results in the
business continuing to be family held.

Select one:

a. False

b. True


The correct answer is: True

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7/16/2019 Assessed Quiz 2

Question 2
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

Under Lifecycle approach, capital structures depend on the first and last
stage of development of the firm.

Select one:

a. False

b. True

The correct answer is: False

Question 3
Correct

Mark 1.00 out of 1.00

A fundamental rationale for finance theory is that an investor seeks to

minimize wealth by making investments that provide a return that is
commensurate with the risk associated with the investment.

Select one:

a. True

b. False


The correct answer is: False

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Question 4
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

The term small firm effect describes the persistent and universal
phenomenon that the returns received on investments in small
enterprises are higher than predicted by the capital asset pricing model.

Select one:

a. True

b. False

The correct answer is: True

Question 5
Correct

Mark 1.00 out of 1.00

The equity gap refers to the fact that most small firms will absolutely
inject any addition of new equity by additional (new) owners. The
reason for this inclusion is the skills and ideas that additional equity
brings.

Select one:

a. True

b. False


The correct answer is: False

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7/16/2019 Assessed Quiz 2

Question 6
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

Capital structure refers to the mix of debt, equity and retained earnings
used to fund operations. The desire for control on the part of owners
will be the primary factor influencing capital structure.

Select one:

a. False

b. True


The correct answer is: True

Question 7
Incorrect

Mark 0.00 out of 1.00

The main assumptions in franchising from the point of view of the

franchisor are that the franchisee will not free ride or shirk or will
conform to the rules concerning prices, opening hours etc. thereby
building on the image of the franchise.

Select one:

a. True

b. False

The correct answer is: False

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7/16/2019 Assessed Quiz 2

Question 8
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

The major uses of the capital asset pricing model are to calculate
required returns of SMEs. The required return is of course, equal to the
cost of equity for the firm concerned. This then enables the calculation
of a weighted-average cost of capital.

Select one:

a. False

b. True

The correct answer is: False

Question 9
Correct

Mark 1.00 out of 1.00

The traditional approach to measuring beta relies on access to share

market data. This is not available for small non-traded enterprises.

Select one:

a. True

b. False

The correct answer is: True

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7/16/2019 Assessed Quiz 2

Question 10
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

Franchising is regarded as a hybrid form of small enterprise ownership

because it brings together aspects of big business and small enterprise
organizational forms.

Select one:

a. False

b. True


The correct answer is: True

Question 11
Correct

Mark 1.00 out of 1.00

The small unquoted owner-managed firm may be better able to survive

with lower profitability than a larger quoted firm because it is less liable
to be taken over. However, if investment decisions are so bad that they
result in losses, the firm’s days are likely to be numbered.

Select one:

a. False

b. True


The correct answer is: True

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7/16/2019 Assessed Quiz 2

Question 12
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

Liquidity is particularly important for small enterprises because of the

perception that cash holdings is an important signal to creditors and
other stakeholders about the financial stability of the business.

Select one:

a. False

b. True


The correct answer is: True

Question 13
Incorrect

Mark 0.00 out of 1.00

The finance gap is a term used to summarize the factors which may
exist to assist SMEs obtaining funding on the terms and in the forms
considered appropriate.

Select one:

a. True

b. False

The correct answer is: False

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7/16/2019 Assessed Quiz 2

Question 14
Correct

Mark 1.00 out of 1.00

 ▶ FM202_201803 ▶ Assessed Quiz 2

Agency theory seeks to explain the relationships between business

owners (normally shareholders) and managers. Basically, where there is
a separation of ownership and control then terms and conditions need
to be established (normally in some contractual form) to align the
interests of the parties and encourage behaviors consistent with those
objectives.

Select one:

a. False

b. True


The correct answer is: True

Question 15
Correct

Mark 1.00 out of 1.00

Bootstrap finance sources are those that provide resources without

reliance on traditional funding sources. These are often resources
provided by the founding owner-manager.

Select one:

a. False

b. True


The correct answer is: True

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7/16/2019 Assessed Quiz 2

 ▶ FM202_201803 ▶ Assessed Quiz 2

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