Test Bank for Intermediate Financial Management (MindTap Course List), 12th Edition – Eugene F. Brigham & Phillip R. Daves | Complete Test Bank | Corporate Finance, Valuation & Financial Management Exam Prep

Intermediate Financial Management
(MindTap Course List), 12th Edition
Complete Test Bank | Corporate Finance,
Valuation & Financial Decision-Making
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, Test Bank For Intermediate Financial Management, 12th
Edition By Eugene F. Brigham, Phillip R. Daves. Chapter
1-32.


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
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
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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
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TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge


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.
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a. True
b. False
ANSWER: False
POINTS: 1
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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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LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge


3. There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of
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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
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, b. False
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
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
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b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
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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: Proprietorship
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KEYWORDS: Bloom’s: Knowledge


5. One key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value.
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a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
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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
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TOPICS: Limited liability
KEYWORDS: Bloom’s: Knowledge

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, 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
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.2 - LO: 1-3
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: Value maximization
KEYWORDS: Bloom’s: Knowledge
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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
ANSWER: True
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POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.3 - LO: 1-4
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the
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firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Financial intermediaries
KEYWORDS: Bloom’s: Knowledge
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8. The disadvantages associated with a proprietorship are similar to those under a partnership. One
exception relates to the more 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.
a. True
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b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
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NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC: Goals of the

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