TEST BANK FOR FOUNDATIONS OF
FINANCE, 10TH EDITION BY
KEOWN/MARTIN AND PETTY
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Chapter 1 An Introduction to the Foundations of Financial Management
Learning Objective 1.1
1) Financial management deals with the maintenance and creation of
economic value or wealth. Answer: TRUE
Diff: 1 Page Ref: 3
Keywords: Financial Management
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
2) Each financial decision made by a corporate manager can be evaluated by its
direct impact on the corporation's stock price.
Answer: FALSE
Diff: 1 Page Ref:
4
Keywords: Goal of the
Firm Learning Obj.: L.O.
1.1 AACSB: Reflective
Thinking
3) The fundamental goal of a business is to maximize the retained earnings available
to the corporation's shareholders.
Answer: FALSE
Diff: 1 Page Ref:
3
Keywords: Goal of the
Firm Learning Obj.: L.O.
1.1 AACSB: Reflective
Thinking
2
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4) Shareholder wealth maximization means maximizing the price of the
existing common stock. Answer: TRUE
Diff: 1 Page Ref: 3
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3
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Keywords: Shareholder Wealth, Goal of the
Firm Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
5) It is important to evaluate a corporate manager's financial decision by measuring the
effect the decision
should have on the corporation's stock price if everything else were
held constant. Answer: TRUE
Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Maximize Shareholder
Wealth Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
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