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,Fundamentals of Corporate Finance, 5Ce (Berk)
Chapter 1 Corporate Finance and the Financial Manager
1.1 Why Study Finance?
1) The Valuation Principle shows how to make the costs and benefits of a decision comparable so that we
can evaluate them properly.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
2) Which of the following best describes why the Valuation Principle is a key concept in making financial
decisions?
A) It shows how to assign monetary value to intangibles such as good health and well-being.
B) It allows fixed assets and liquid assets to be valued correctly.
C) It gives a good indication of the net worth of a person, item, or company and can be used to estimate
any changes in that net worth.
D) It shows how to make the costs and benefits of a decision comparable so that we can weigh them
properly.
E) It allows us to produce accurate financial statements.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
3) Both personal financial decisions and business financial decisions can best be made by applying the:
A) Internal Ranking Criteria.
B) Best Alternatives Matrix.
C) Valuation Principle.
D) Financial Comparison Analysis.
E) Law of One Price.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
1
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, 1.2 The Three Types of Firms
1) Partnerships are the most common type of business firm in the world.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
2) Corporations have come to dominate the business world through their ability to raise large amounts of
capital by sale of ownership shares to anonymous outside investors.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
3) Which of the following types of firms do NOT have limited liability?
A) sole proprietorships
B) limited partnerships
C) private corporations
D) public corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
4) Over 60% of all Canadian business profit is generated by which type of firm?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
2
Copyright © 2025
All Chapters Included
Complete Answers
Latest Edition
Instant PDF Download
,This Page Intentionally Left Blank
,Fundamentals of Corporate Finance, 5Ce (Berk)
Chapter 1 Corporate Finance and the Financial Manager
1.1 Why Study Finance?
1) The Valuation Principle shows how to make the costs and benefits of a decision comparable so that we
can evaluate them properly.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
2) Which of the following best describes why the Valuation Principle is a key concept in making financial
decisions?
A) It shows how to assign monetary value to intangibles such as good health and well-being.
B) It allows fixed assets and liquid assets to be valued correctly.
C) It gives a good indication of the net worth of a person, item, or company and can be used to estimate
any changes in that net worth.
D) It shows how to make the costs and benefits of a decision comparable so that we can weigh them
properly.
E) It allows us to produce accurate financial statements.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
3) Both personal financial decisions and business financial decisions can best be made by applying the:
A) Internal Ranking Criteria.
B) Best Alternatives Matrix.
C) Valuation Principle.
D) Financial Comparison Analysis.
E) Law of One Price.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business lives
1
Copyright © 2025
, 1.2 The Three Types of Firms
1) Partnerships are the most common type of business firm in the world.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
2) Corporations have come to dominate the business world through their ability to raise large amounts of
capital by sale of ownership shares to anonymous outside investors.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
3) Which of the following types of firms do NOT have limited liability?
A) sole proprietorships
B) limited partnerships
C) private corporations
D) public corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
4) Over 60% of all Canadian business profit is generated by which type of firm?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why the
advantages of the corporate form have led it to dominate economic activity
2
Copyright © 2025
