,Foundations of Financial Management, 17e (Block)f f f f f
Chapter 1 The Goals and Activities of Financial Management
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1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
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Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
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Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
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and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
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Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Financial management decisions f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
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and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
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investments.
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Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
4) Real capital is composed of long-term plant and equipment.
f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
,AACSB: Reflective Thinking
Accessibility: Keyboard
f f f
Navigation
f
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
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maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
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Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
f f f f f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
7) Recently, the emphasis of financial management has been on the relationship between risk and
f f f f f f f f f f f f f
return.
f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
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and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
f f f f f f f f f f f f f f f f f f f
Bloom's: Understand
f f
AACSB: Analytical Thinking f f
Accessibility:
f Keyboard f
Navigation
f
8) The first Nobel Prizes given to finance professors were for their contributions to capital
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structure theory and portfolio theories of risk and return.
f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
, AACSB: Reflective Thinking f
Accessibility: Keyboard Navigation
f f
9) How investors handle risk is an important topic that usually only economists observe.
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Answer: FALSE f f
Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on. f f f f f f f f f f f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
10) Mortgage-backed securities were devalued by accounting standards because of the high credit f f f f f f f f f f f
ratings (AAA).
f f
Answer: FALSE f f
Explanation: These securities were devalued because borrowers defaulted on their loans and didn't
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have the financial means to back up their loans in other ways.
f f f f f f f f f f f f
Difficulty: 1 Easy f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
11) "Credit default swaps" are one of several tools that Congress and the President of the United
f f f f f f f f f f f f f f f
States have jointly developed to ease the financial crisis that began in 2008.
f f f f f f f f f f f f f
Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Understand
AACSB: Analytical Thinking
f f f
Accessibility: Keyboard Navigation f
Chapter 1 The Goals and Activities of Financial Management
f f f f f f f
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
f f f f f f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
f f f f f f f f f f f f f
Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Financial management decisions f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
f f f f f f f f f f f f f
investments.
f
Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
4) Real capital is composed of long-term plant and equipment.
f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
,AACSB: Reflective Thinking
Accessibility: Keyboard
f f f
Navigation
f
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
f f f f f f f f f f f f f
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
f f f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
f f f f f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
7) Recently, the emphasis of financial management has been on the relationship between risk and
f f f f f f f f f f f f f
return.
f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
f f f f f f f f f f f f f f f f f f f
Bloom's: Understand
f f
AACSB: Analytical Thinking f f
Accessibility:
f Keyboard f
Navigation
f
8) The first Nobel Prizes given to finance professors were for their contributions to capital
f f f f f f f f f f f f f
structure theory and portfolio theories of risk and return.
f f f f f f f f f
Answer: TRUE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
, AACSB: Reflective Thinking f
Accessibility: Keyboard Navigation
f f
9) How investors handle risk is an important topic that usually only economists observe.
f f f f f f f f f f f f
Answer: FALSE f f
Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on. f f f f f f f f f f f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
10) Mortgage-backed securities were devalued by accounting standards because of the high credit f f f f f f f f f f f
ratings (AAA).
f f
Answer: FALSE f f
Explanation: These securities were devalued because borrowers defaulted on their loans and didn't
f f f f f f f f f f f f
have the financial means to back up their loans in other ways.
f f f f f f f f f f f f
Difficulty: 1 Easy f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Remember
AACSB: Reflective Thinking
f f f
Accessibility: Keyboard Navigation f
11) "Credit default swaps" are one of several tools that Congress and the President of the United
f f f f f f f f f f f f f f f
States have jointly developed to ease the financial crisis that began in 2008.
f f f f f f f f f f f f f
Answer: FALSE f
Difficulty: 1 Easy
f f f
Topic: Introduction to corporate finance
f f f f f
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
f f f f f f f f f f f
and a number of other areas.
f f f f f f
Bloom's: Understand
AACSB: Analytical Thinking
f f f
Accessibility: Keyboard Navigation f
