BAM Quiz#5

1. One way to ease the burden of managing a business is to hire an outside consultant.
Which of the following is an example of an outside consultant that might be useful to a
small interior design company?
- All of the above
2. International trade specialists that buy goods at a discount from small businesses and
resell them abroad are called:
- Export trading companies
3. Mark Ghermizian had quit his job and was looking to start a small business so he could
be his own boss. When he read that people spend up to fifteen minutes every day
staring at a bathroom stall door, he decided he would find advertisers who wanted to
pay to have their advertising messages on bathroom stall doors. Since he has his idea,
Ghermizian's next step is to:
- Choose a form of business organization
4. Once the business plan is finished, the next step is to:
- Find financing for the business
5. Andy Yocom saw prime advertising space on the flags on the golf course. He reasoned
that any marketing messages would get prominent attention if they were placed on the
flags since golfers focus on them when they take their shots. As a result Yocom used his
own initiative and money to start Invision Golf Group Inc. Yocom is an example of a(n):
- Entrepreneur
6. The difference between the small business owner and the entrepreneur is that the
entrepreneur:
- Assumes the risk of the business
7. The difference between small business owners and entrepreneurs is that small business
owners:
- Accept the status quo and take short-term view of the future
8. Kathy Elliot has decided that she will start an Internet company to sell reliable used cars
to customers nationwide. She has decided to use the sole proprietorship business
format. Elliot's next step is to write a formal _____ before she applies for a business loan.
- Business Plan
9. Marc Adler is the owner of Macquarium, a multimillion-dollar communications company
that does everything from video productions to creating Web sites to public relations
campaigns. Macquarium has done this sort of work for BellSouth and SnapOn Tools.
Even though these companies could have prepared their videos and created their Web
sites in-house, these tasks were:
- Outsourced
10. Which of the following is a characteristic of the entrepreneurial personality?
- Ambitious
11. Once small businesses hire employees, they can _____ to increase job satisfaction and
retain their employees.
- Do all of the above
12. Andy Yocom was looking to start a small business so he could be his own boss. While
golfing one day, he saw prime advertising space on the flags on the course. He has
decided to call his new venture Invision Golf Group Inc. What should he include in his
business plan?
- All of the above
13. A business plan:
- Is accurately described by all of the above
14. Which of the following is a characteristic of the entrepreneurial personality?
- Ambitious

15. Who provides the start-up financing for the majority of the new small businesses?
- The business owner and his or her family and friends
16. Which of the following is a reason why small businesses thrives in Canada?
- Rapidly changing technology
17. Michael Bronner made a fortune in the direct marketing business as the cofounder and
CEO of Bronner Slosberg Humphrey, a wildly successful direct-marketing firm. His newest
venture, Upromise Inc., enlists some of America’s largest corporations to help families
pay for college and is extremely successful. Entrepreneur Bonner would more than likely
have which of the following characteristics?
- All of the above
18. Which of the following is NOT one of the advantages of owning a small business?
- Avoidance of taxes
19. An entrepreneur is a person who _ a business
- Owns and operates
20. All of the following are example of disadvantages associated with the ownership of a
small business EXCEPT:
- Being your own boss
21. When Allison Logue found out her children were allergic to corn, she started looking for
sweets and starches that were corn-free and was dismayed to find very few such
products on the market. As a result, she has started her own small business to produce
and market corn-free desserts. It is a small market, and Logue plans to keep her business
small. Logue is an example of a(an):
- Micropreneur
22. _ are entrepreneurs who apply their creativity, vision, and risk taking within a large
corporation rather than starting a company of their own. They enjoy a high degree of
autonomy while receiving a regular salary and financial backing from their employer.
- Intrapreneurs
23. Navim Jain stock to investors in order to finance Sparkart, a company that markets
software to track how many times music is played and shared among peers, Jain used _
financing.
- Equity
24. Hannah Li wants to quit her job as a legal secretary and start her own small business.
She knows that she will be successful if she can find the right idea. Where can Li look for
ideas for her new business?
- All of the above
25. The first step in starting your own business is:
- A self-assessment
26. Gord Larose and his friend David Allan worked in Ottawa at Nortel Networks, a giant
telecommunications-equipment maker. One Friday afternoon, over a few beers in Larose's
kitchen, they dreamed up a scheme for renting software over the Internet. Instead of quitting
their jobs, they reported to work on Monday, explained their plan to their boss, and began
working to make their idea a reality. Four years later, their idea has evolved into an important
division of Nortel called Channelware. Larose and Allan are examples of:
- Intrapreneurs
27. Jil Hansom borrowed $40,000 from a credit union to start a company that makes and sells peach
salsa. Hansom used _____ financing.
- Debt
28. _____ are individual investors or groups of experienced investors who provide funding for start-
up businesses.
- Angel investors
29. After graduating from college, Joseph Tantillo decided to start a retail Web site that specializes in
personalized Greek apparel. To fund his Web site, he borrowed money from his parents (who
expect to be repaid with interest). In other words, he used _____ financing.
- Debt
30. A common use of business plan is to
- Persuade lenders and investors to finance the venture
31. Once Arnold Patel had decided he wanted to quit working as a Web designer for a large
advertising agency and go into some kind of business for himself, he did a self-assessment, which
indicated that he had an entrepreneurial spirit. His next step will be to:
- Find the idea for his business
32. One of the advantages of owning a small business is:
- Flexibility
33. _____ is financing obtained from investment firms that specialize in financing small, high-growth
companies and receive an ownership interest and a voice in management in return for their
money.
- Venture Capital
34. A _ describes in detail the idea for new business and how it will be carried out.
- Business Plan
35. All of the following are characteristics of an entrepreneurial personality EXCEPT:
- The willingness to be a follower rather than a leader
36. Which of the following is NOT a reason why small business thrives in Canada?
- Guaranteed profits
37. Intrapreneurs:
- Have a high degree of autonomy in spite of the fact they work for a large corporation
38. One way to ease the burden of managing a business is to:
- Hire outside consultant
39. The person who takes the risk of starting and managing a business to make a profit is
called a(an):
- Entrepreneur
BAM Practice Quiz 6

1. _____ managers are the managers concerned with implementing the plans and policies
of top managers and supervising lower-level managers.
- Middle
2. Two co-workers at Nortel came up with an idea for renting software over the Internet.
Nortel's top management liked the idea and set up a special division called Channelware
devoted to taking the idea and making a new product. The establishment of a new
company and assigning the employees in the division the task of making an idea a
reality requires which management function?
- Organizing
3. According to the Sports Business Journal, Levy Restaurants is the leading purveyor of
premium food at major sports venues. It has chefs that specialize in the preparation of
various foods working at different sports venues. For the Super Bowl, Levy flew in more
than two dozen of its chefs from venues to prepare food to feed the Super Bowl crowd.
The chefs had the necessary _____ skills.
- Technical
4. Which of the following statements about managerial skills is true?
- All of the above
5. Tawna Reed was hired for a top managerial position in Nike Corporation because she
had creative ability and a good overall feel for the athletic shoe industry. Reed is said to
have good _____ skills.
- Conceptual
6. Creative Good is a 35-person strategy-consulting firm that believes you must create a
good employee experience to offer a good customer experience. Toward this goal,
Creative Good focuses on collaborative workshops, full-staff meetings, and a company-
wide emphasis on relationships and communication--from the customer to the client, to
the employees of Creative Good, and to the company's leaders. This description
represents the _____ of Creative Good.
- Corporate culture
7. When John Mackey, CEO of Whole Foods Markets, hosted a fundraising event in his role
as honorary chairman of the national People for the Ethical Treatment of Animals (PETA)
organization, he is fulfilling his _____ managerial role.
- Interpersonal
8. Manila Water, the provider of the water and sewerage services in the capital of the
Philippines has purchased the government owned water and sewerage system for the
entire country. In terms of the managerial hierarchy, its president Antonino Aquino is in
_____ management.
- Top
9. An organization's _____ is its general purpose or reason for existence.
- Mission
10. Gillette wanted to make its distribution system more efficient. It decided to implant a
tiny computer chip in each of its products' packages, so it could track its products and
 improve its inventory management. Which management function would be used to
achieve the goal of greater efficiency?
- Controlling
11. Alysha Johnson is a manager who communicates effectively, successfully motivates and
leads her workers, and allows them leeway in making decisions. Copeland is said to
have good:
- Human Relation skills
12. _____ planning is short-range, detailed planning that is based on long-range planning. It
typically has a time frame that is less than one year long.
- Tactical
13. _____ means giving employees increased autonomy and discretion to make decisions as
well as control over the resources needed to make those decisions.
- Empowerment
14. Reader's Digest Association, Inc., has published Reader's Digest magazine for over 80
years, and many believe the publication is dated and can no longer attract many
readers. They believe _____ plans are needed to revamp the magazine's content,
editorial staff, and readership.
- Strategic
15. The world's largest bank. Deutsche Bank set as its objective to make its name more
recognizable in Canada. The decision to sponsor a PGA golf tournament to accomplish
this organizational objective is part of which management function?
- Planning
16. Allocation of resources, approval of projects, and authorization of budgets are all
activities that a manager performs in his or her _____ management role.
- Decisional
17. Management needs to be prepared to deal with problems and seize opportunities as
they arise. A company often identifies alternative courses of action to be taken if events
undercut a strategic or tactical plan. These are called _____ plans.
- Contingency
18. The lowest level of management, which usually has the most people to manage, is called
_____ management.
- Supervisory
19. Manila Water, the provider of the water and sewerage services in the capital of the
Philippines has purchased the government owned water and sewerage system for the
entire country. It promises to make the nation's water and sewerage system run as
efficiently and profitably as the one it operates in Manila. Its primary challenge will be
the management function of ____ because it needs to convince the 2,000 employees it
inherited from the government-owned facility to work more efficiently.
- Leadership
20. Dewayne Gibbons of Burger King decided to introduce a new sliced chicken sandwich
without consulting any of his subordinates or the franchise. Managers who use this style
of decision making exhibit the _____ style of leadership.
- Autocratic
Quiz 6

1. A clothing wholesaler that buys most of its inventory from manufacturers in the
Caribbean should have a _ plan in the event a hurricane demolishes the manufacturing
facility of one of its principal suppliers.
- Contingency
2. Luca Villanova has a major decision to make about how to increase attendance for the
professional soccer team he owns. He wants to call his players and coaches together,
generate alternatives, and come up with a solution by mutual agreement and vote. His
style of leadership is called:
- Democratic (participative)
3. Middle managers usually:
- Carry out plans and policies of top management
4. Which of the following is NOT a current trend in management and leadership?
- Increasing dependence on autocratic leadership
5. Among managers there are three distinctive leadership styles. They are:
- Autocratic, participative, and free-rein
6. The first step in controlling is to:
- Establish performance standards
7. Which of the following is NOT one of the four functions of management?
- Budgeting
8. The _ role of a manager consists of relationships with other people as figurehead, leader,
and liaison.
- Interpersonal
9. _ planning is the creation of long-range, comprehensive objectives and the development
of long-term courses of action.
- Strategic
10. The world’s largest bank, Deutsche Bank, set as its objective to make its brand name as
recognizable in Canada as FedEx and Visa are over the next ten year. The
implementation of this long-range plan would require _ planning.
- Tactical
11. Which of the following is NOT one of the five key types of power?
- Influential
12. The lowest level of management, which usually has the most people to manage, is called
_ management.
- Supervisory
13. The Austrian-company Wienerberger is the world's largest brickmaker. It had to use the
management function of when it integrated the employees and manufacturing facilities
that it gained from a merger with a brickmaking company in Great Britain.
- organizing
14. Top management usually performs all of the following tasks EXCEPT:
- Direct workers on the assembly line
15. _ provides the structure of people, positions, departments, and activities within which
the company of objectives can be accomplished.
 - Organizing
16. Managers typically follow five steps in the decision-making process. The first step is to:
- Recognize or define the problem or opportunity
17. Leadership is:
- Guiding others to achieve specific goals
18. First stage in controlling is to:
- Set performance standards and goals
19. Feedback is an important part of which function of management?
- Controlling
20. When manager Mariah Pitner delivered the company’s financial report to local bankers
and analysts, she was acting in a(n) _ role.
- Informational
21. Which of the following statements about corporate culture is true?
- All of the above
22. Stuart McFarland is sales manager for a hotel. His job entails leading, motivating, and
communicating with employees. McFarland’s main management activity is:
- Leadership
23. _ is the process of arranging the structure and relationships of human and material
resources to carry out an organization’s plans.
- Organizing
24. _ is the process of ensuring that the organization’s objectives are being met and of
correcting deviations from the plan.
- Controlling
25. _ is the set of attitudes, values, and standards that distinguishes one organization from
another.
- Corporate culture
26. Management involves:
- All of the above
27. _ the process of guiding the development, maintenance, and allocation of resources
needed to attain organization goals.
- Management
28. _ skills refer to a manager’s ability to operate in diverse cultural environments.
- Global management

BAM Practice Quiz #8

1. The oldest and largest organized securities exchange in the United States is the:
- New York Stock Exchange
2. Commercial paper is:
- A type of IOU
3. When Magna Manufacturing sells hand on screwdriver sets to Malloy Building Supply Company,
Magna bills the tool manufacturer for the screwdriver purchase with terms of payment, which
specify when the account is due. This type of unsecured loan is called _____ credit.
- Trade
 4. Three important forms of long-term (capital) expenditures are:
- term loans, mortgage loans, and bonds
5. The major advantage of debt financing is the:
- Deductibility of interest expenses
6. The _____ system is the first electronic-based stock market and the largest over-the-counter
market.
- NASDAQ
7. _____ is the process of selecting the capital expenditures that offer the best returns and meet
the goal of maximizing the firm's value.
- Capital Budgeting
8. The three main types of unsecured short-term loans are:
- Trade credit, bank loans, and commercial paper
9. Dalrymple Bay Coal Terminal, a coal-handling facility and export terminal in Queensland,
Australia, has issued triple-A rated bonds for $680 million in Australian dollars. The bonds will be
used to refinance existing bank debt caused by the acquisition of eases from the Queensland
government in 2002. The Commonwealth Bank of Australia acted as investment bankers to the
transaction. This means the Commonwealth Bank of Australia:
- Bought the bonds from Dalrymple and sold them to the public
10. Short-term loans
- Are shown as a current liability on the balance sheet
11. Making sure that enough cash is on hand to pay bills as they come due and to meet unexpected
expenses is called cash:
- Management
12. Term loans:
- Can be secured or unsecured
13. Securities that are not traded on the organized stock exchanges are traded in the:
- Over-the-counter market
14. Organized stock exchanges operate like a(n):
- Auction company
15. Which of the following statements about preferred stock is true?
- Preferred stockholders are paid dividends before the company can pay any dividends to common
stockholders
16. Three important forms of long-term (capital) expenditures are:
- Term loans, mortgage loans, and bonds
17. A(n) _____ is a type of loan often used to finance buildup of inventory for seasonal (cyclical)
businesses just before their strongest sales period.
- Unsecured bank loan
18. The _____ system is the first electronic-based stock market and the largest over-the-counter
market.
- NASDAQ

Quiz 8

1. Is the process of buying securities from corporations and governments and reselling them to the
public.
- Underwriting
2. Secured short-term loans are usually secured by:
- Accounts receivable and inventory
 3. Keisha Hunter keeps track of day-to-day operational data to make sure her employer has enough
cash to run the business and will determine if and when the company she works for should open
a second distribution center. Hunter is a(n) _ manager.
- Financial
4. A secured loan requires that the borrower pledge specific assets to secure the loan. These assets
are called:
- Collateral
5. A(n) loan is a long-term loan using real estate or other assets as collateral
- Mortgage
6. Which of the following would be an example of a capital expenditure for a superstore that
specializes in outdoor grills and other items needed for outside dining?
- A parking lot
7. Long-term debts (liabilities) for corporation and governments are called:
- Bonds
8. The funds that are reinvested in the firm out of profits and after dividends are paid are called:
- Retained earnings
9. Grainger Distribution Company sold Long Electronics ten circuit breakers for $179.00 each. Long
Electronics will be allowed thirty days to pay the bill. Grainger will carry the $1790.00 on its
books as a(n):
- Accounts receivable
10. Business loans available from commercial banks with terms generally five to twelve years and
secured or unsecured are called _ loans.
- Term
11. Long-term debt would be used to:
- Do none of the above
12. Dividends are:
- Payments to the shareholders from company earnings
13. Financial managers constantly share strive for a balance between:
- The opportunity to profit and the potential for loss
14. In finance, _ is the potential for loss.
- Risk
15. Blackwell investments specializes in acting as an intermediary in taking companies public. The
financial middleman is an example of a(an):
- Investment banker
16. Private individual investors who sometimes provide venture capital to small firms in need of
equity capital are called:
- Angel investors
17. Which statement describes the major drawback to the use of debt financing?
- Financial risks is always a possibility with debt financing
18. Esselte
- No longer sells stock to the public
19. Investment professionals who are paid to manage other people’s money.
- Institutional investors

BAM Practice Quiz 7:

1. Financial institutions can be divided into two broad categories. These are ______
institutions.
- depository and nondepository
2. Which of the following is an example of a depository financial institution?
- credit union
3. A bank is engaged in _____ when it accepts the farmer's deposit of $127,000, and then
makes a business loan of $50,000 to a small business owner.
- financial intermediation
4. Competing against foreign banks can be difficult for Canadian banks because:
- foreign banks are subject to fewer regulations than Canadian banks
5. Which of the following services would you NOT expect a depository institution to offer?
- loans to individuals with poor credit
6. Hal Silverstein has a savings account, also called a _____, at his local credit union.
- time deposit
7. The two types of finance companies are:
- commercial finance companies and consumer finance companies
8. Any object or objects that a group of people use to buy and sell goods and services is
called:
- money
9. One of the major financial burdens for many companies is the need to provide and
maintain funds to provide benefits needed by former employees. One of the ways that ABC
Airline tried to avoid bankruptcy was by reducing the payout from this fund because returns on
investments were not keeping pace with the number of retirees and their benefit demands. This
example reflects a problem with:
- pension funds
10. Which of the following statements about international banking is true?
- All of the above statements about international banking are true. (Canadian banks play an
important role in global business by providing loans to foreign governments and businesses,
Competing against foreign banks can be difficult for Canadian banks because the Canadian
banks are subject to many more regulations, International banking is a high-risk business, Some
governments protect their banks against foreign competitors.)
11. The three principal tools of the Bank of Canada are:
- reserve requirements, discount rate, and open market operations
12. Money market deposit accounts and certificates of deposit are officially called ______
deposits.
– time
13. Which of the following statements about international banking is true?
- Foreign banks are subject to fewer regulations than Canadian banks.
14. In the process of financial intermediation, households, businesses, and governments can
all be are categorized as:
- demanders of funds
15. Which of the following is an example of a depository financial institution?
- credit union
16. The most frequently used and the most flexible tool that the Bank of Canada has that it
can use to change the economic environment is:
- open market operations
17. Which of the following is NOT one of the key characteristics required in order for money
to be an acceptable medium of exchange?
– profitability
18. Which of the following services would you NOT expect a depository institution to offer?
- loans to individuals with poor credit
19. Which of the following is an example of a depository financial institution?
- credit union
20. The three principal tools of the Bank of Canada are:
- reserve requirements, discount rate, and open market operations
21. Which of the following is NOT one of the key characteristics required in order for money to
be an acceptable medium of exchange?
- profitability
22. Hal Silverstein has a savings account, also called a _____, at his local credit union.
- time deposit
23. When Hadley Jones wanted to buy a truck so he could get to and from his job in a nearby
community, his credit rating was poor. Jones found that the only place he could get a loan was
from a(n) _____ finance company.
- consumer
24. Any object or objects that a group of people use to buy and sell goods and services is called:
- money

Quiz 7:

1. The Canada Deposit Insurance Corporation (CDIC):

- Insures deposits in commercial banks and thrift institutions up to a ceiling of $100,00
per account
2. _ are profit-oriented financial institutions that accept deposits, make business and
consumer loans, invest in government and corporate securities, and provide other
financial services.
- Commercial banks
3. _ are large pools of money set aside by corporations, unions, and governments for later
use in paying retirement benefits to their employees or members.
- Pension Funds
4. _ are deposits at a bank or other financial institution that pay interest but cannot be
withdrawn on demand without penalty.
- Time deposits
5. Finance companies make loans to people who could not get credit anywhere else. To
compensate for taking this extra risk, finance companies:
- Charge higher interest rates that commercial bank do
6. Competing against foreign banks can be difficult for Canadian banks because:
- Foreign banks are subject to fewer regulations than Canadian banks
7. TD Ameritrade is a company that buys and sells stocks and bonds as well as providing its
customers with advice on when to buy and when to sell. TD Ameritrade is an example of
_, a type of nondepository financial institution.
- Brokerage firm
8. Weeds, sand, and paper clips would not make good mediums of exchange because they
lack the key characteristic of:
- Scarcity
9. Ruth Hu recently invested 200,000. She has invested the inherited money in real estate
and government securities. Hu is using her money as a:
- Store of value
10. Dwain Hutcheson is a recent college graduate who found himself in debt as a result of
credit card expenditures and in need of dependable transportation. Hutcheson recently
purchased a used motorcycle from Speed Cycles. In financing the cycle, Hutcheson found
that he would be making payments to Beneficial Corp., a company that deals in poor
credit risks and short-term loans. Hutcheson was dealing with a:
- Finance company
11. Finance companies that make loans to promising new businesses with little track record
and to firms that are unable to get any more bank credit are _ finance companies.
- Commercial
12. A _ makes short-term loans for which the borrower puts up tangible assets (such as an
automobile, inventory, machinery, or property) as security.
- Finance company
13. Cupcakes, hamburgers, and cut flowers would not make good mediums of exchange
because they lack the key characteristic of:
- Durability
14. A checking account is also commonly referred to as a:
- Demand deposit
15. ATMs let customers of banks make deposits and withdrawals while in a shopping center
or supermarket 24 hours a day. The letters ATM stand for:
- Automated teller machine
16. In its role as lender to member banks, the Bank of Canada is called the:
- Banker’s bank
17. Which of the following is an activity performed by the Bank of Canada as it carries out its
monetary policy?
- Distributing currency
18. Bo Riley pays his rent and utility bills each month by writing checks. Riley is using a _
account
- Demand deposit
19. For a college student who needs to buy an $80 textbook, the money she received from
her parents for the purchase of school supplies would be used as a:
- Medium of exchange
20. The _ is an independent, quasi-public corporations backed by the full faith and credit of
the Canadian government that insures deposits in commercial banks and thrift
institutions for up to a ceiling of $100,000 per account.
- Canada Deposit Insurance Corporation (CDIC)
21. Financial Intermediation is the process in which:
- Financial institutions act as intermediaries between the suppliers and demanders of
funds.
22. Which of the following services would you expect a depository institution to offer?
- Electronic funds transfer
23. The Canada Deposit Insurance Corporation (CDIC):
- All
24. Money is used as:
- All of the above
25. A _ is a nonprofit, member-owned financial cooperative.
- Credit union
26. _ is the process of buying securities from corporations and governments and reselling
them to the public.
- Brokering

1. _ management is the art and science of managing a firm’s money so the firm can meet
its goals.
- Financial
2. When a firm goes public, it must reveal such information as:
- All of the above
3. Boulders, wood beams, and lead nails would not make good mediums of exchange
because they lack the key characteristics of:
- Potability
4. _ stock is a security that represents an ownership interest in a corporation and has
voting rights.
- Common
5. Chez Dove is an independent coffeehouse/bookstore that went bankrupt only eight
months after opening due to an unexpected demand for cash to fix a leaking roof. Better
cash _ might have allowed the business to continue operation.
- Management
6. _ are investments certificates that represent either ownership of a corporation or a loan
to the corporation.
- Securities
7. The most important function of the Bank of Canada is carrying out _ policy.
- Monetary
8. Which of the following is an example of nondepository financial institutions?
- Commercial finance companies
9. _ is a short-term unsecured debt issued by a financially strong corporation.
- Commercial paper
10. All of the following are human relations skills EXCEPT:
- Ability to program a computer
11. A common use of business plans is to:
- Persuade lenders and investors to finance the venture
12. The purchase or sale of Canadian government bonds by the Bank of Canada to stimulate or slow down the
economy is called:
- Open market operations
13. As the Toronto-based Four Seasons hotel chain remodels an existing hotel in Mumbai to bring it to the five-
star hotel's exacting standards, it is building a magnificent revolving restaurant overlooking the Arabian Sea
at World. The restaurant structure is an example of a:
- Capital expenditure
14. A company sells its accounts receivable to a financial institution that is in the business of buying accounts
receivable at a discount. This sale is called:
- Factoring
15. Gerald Cooksie owns a restaurant in Wasaga Beach, Ontario. He has arranged a business loan with the
bank where he has his business account. The terms of the loan allow him to borrow up to $13,500 within the
next year if the bank has funds available to lend: he must pay interest only on the unpaid loan balance.
Cooksie has arranged a:
- Line of credit
16. The primary goal of the financial manager is to:
- Maximize the value of the firm to its owners
17. Insurance policyholders make premium payments to buy financial protection. Insurance companies invest
the premiums in:
- All of the above
18. A loan that requires the borrower to pledge specific assets as collateral is called a(n).
- Secured
 1. What is the Bank of Canada and what is its mission?
The Bank of Canada, or Canada’s central bank, is the central authority whose functions are to
regulate money, credit, and banking in Canada. The Bank of Canada is a government-owned
crown corporation that is run by the federal government with the primary responsibility of
carrying out monetary policy to manage economic fluctuations and keep inflation stable. It
supervises and regulates bank operations and other financial institutions with similar functions.
The Bank of Canada’s primary mission is to preserve and monitor monetary stability and credit
systems that support bank operations, especially, Canada’s commercial banks.

2. What are the two main tools used by the Bank of Canada? Describe how these tools
work.
Open Market Operations - Of all the tools that the Bank of Canada uses, the most flexible and
frequently used is the “open market operations” in changing the economic environment. This
basically controls the growth rate of the money supply by buying and selling Canadian
government bonds. The purchase of government bonds increases the supply of money, which
lowers interest rates, thus, stimulating economic growth. On the other hand, the selling of
government bonds decreases the money supply, which raises interest rates, thus, slows down
the economy.

Discount Rate – banks, such as commercial banks, lend money to the central bank or Bank of
Canada, that is why it is the banker’s bank or the lender of last resort. In lending money, the
interest rate that the Bank of Canada charges is the discount rate or bank rate. The bank of
Canada raises or lowers the discount rate depending on the circumstances. For instance, the
Bank of Canada raises the discount rate to decrease the money supply, which increases interest
rates, thus slowing down the economy. But when the Central Bank lowers the discount rate, the
money supply increases, which lowers the interest rates, thus, stimulating economic growth.

The most frequently used and the most flexible tool that the Bank of Canada has that it can use
to change the economic environment is open market operations.

1. The purchase or sale of Canadian government bonds by the Bank of Canada to stimulate or slow down the
economy is called:
- Open market operations