Financial Management: Theory and Practice | 17th Edition | Cengage Learning | Comprehensive Test Bank, Exam Prep Questions & Verified Answers for Mastery

TEST BANK for Financial Management: Theory and Practice 17th
Edition by Eugene Brigham, Michael Ehrhardt
All Chapters Fully Covered| Verified Chapters & Accurate Solutions for Exam
Preparations| A+ PASS ASSURED
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,CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
1. The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth
of the firm's owners.
a. True
b. False
CORRECT ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
Fr

TOPICS: Firm organization
Bloom’s: Knowledge
a

KEYWORDS:
nk

2. The major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their
owners limited liability, whereas proprietorships do not.
ly

a. True
b. False
ne

CORRECT ANSWER: False
POINTS: 1
A

DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
pl

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
us

and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
Pa

TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge
ss

3. There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and
(3) difficulty of transferring ownership. These combine to make it difficult for partnerships to attract large amounts of capital and
thus to grow to a very large size.
a. True
b. False
CORRECT ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information

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,CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Partnership

KEYWORDS: Bloom’s: Knowledge

4. Two disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's unlimited personal
liability for the business' debts.
a. True
b. False
CORRECT ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
Fr

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
a

and analysis of public information
nk

LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Proprietorship
ly

KEYWORDS: Bloom’s: Knowledge
ne

5. One key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value.
a. True
A

b. False
CORRECT ANSWER: True
pl

POINTS: 1
DIFFICULTY: Difficulty: Easy
us

LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
Pa

STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
ss

TOPICS: Limited liability
KEYWORDS: Bloom’s: Knowledge

6. If a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus
shareholders' wealth.
a. True
b. False
CORRECT ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.2 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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, CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Value maximization

KEYWORDS: Bloom’s: Knowledge

7. If Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or
individuals, Firm A is a financial intermediary.
a. True
b. False
CORRECT ANSWER: True
POINTS: 1
Fr

DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.3 - LO: 1-4
a

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
nk

STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information
ly

LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Financial intermediaries
ne

KEYWORDS: Bloom’s: Knowledge

8. The disadvantages associated with a proprietorship are similar to those under a partnership. One exception relates to the more
A

formal nature of the partnership agreement and the commitment of all partners' personal assets. As a result, partnerships do not have
difficulty raising large amounts of capital.
pl

a. True
us

b. False
CORRECT ANSWER: False
POINTS: 1
Pa

DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
ss

NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the firm, role of finance,
and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Partnership
KEYWORDS: Bloom’s: Comprehension

9. The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed,
are two key advantages to that form of business.
a. True
b. False
CORRECT ANSWER: True
POINTS: 1
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