TEST BANK
Fundamentals of Corporate Finance
STEPHEN A. ROSS, RANDOLPH W. WESTERFIELD, BRADFORD D. JORDAN
13th Edition
1|Page
,Chapter 01 Introduction to Corporate Finance Answer Key
Multiple Choice Questions
1. Which one of the following terms is defined as the management of a firm's long-
term investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Capital budgeting
2. Which one of the following terms is defined as the mixture of a firm's debt and
equity financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Capital structure
,3. Which one of the following is defined as a firm's short-term assets and its short-
term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Working capital
4. A business owned by a solitary individual who has unlimited liability for its debt is
called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: Sole proprietorship
, 5. A business formed by two or more individuals who each have unlimited liability for all
of the firm's business debts is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: General partnership
6. A business partner whose potential financial loss in the partnership will not exceed his
or her investment in that partnership is called a:
A. generally partner.
B. sole proprietor.
C. limited partner.
D. corporateshareholder.
E. zero partner.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: Limited partner
Fundamentals of Corporate Finance
STEPHEN A. ROSS, RANDOLPH W. WESTERFIELD, BRADFORD D. JORDAN
13th Edition
1|Page
,Chapter 01 Introduction to Corporate Finance Answer Key
Multiple Choice Questions
1. Which one of the following terms is defined as the management of a firm's long-
term investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Capital budgeting
2. Which one of the following terms is defined as the mixture of a firm's debt and
equity financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Capital structure
,3. Which one of the following is defined as a firm's short-term assets and its short-
term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital
structure Refer to
section 1.1
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-1
Section: 1.1
Topic: Working capital
4. A business owned by a solitary individual who has unlimited liability for its debt is
called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: Sole proprietorship
, 5. A business formed by two or more individuals who each have unlimited liability for all
of the firm's business debts is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: General partnership
6. A business partner whose potential financial loss in the partnership will not exceed his
or her investment in that partnership is called a:
A. generally partner.
B. sole proprietor.
C. limited partner.
D. corporateshareholder.
E. zero partner.
Refer to section 1.2
AACSB: N/A
Difficulty: Basic Learning
Objective: 1-3
Section: 1.2
Topic: Limited partner
