Solutions Manual For Fundamentals of Financial
Management thirteenth edition James C. Van
Horne
Solutions Manual: Fundamentals of Financial Management
(Van Horne Style) - Q&A
Part 1: The Scope and Environment of Financial Management
1. What is the primary goal of the financial manager?
A) Maximize sales
B) Maximize market share
C) Maximize the wealth of the shareholders
D) Minimize costs
2. The key decision-making area of finance concerned with a
firm's fixed asset acquisition is called:
A) Working capital management
B) Capital budgeting
C) Capital structure theory
D) The dividend decision
3. The term "agency problem" refers to:
A) The problem of ensuring the company pays no taxes
B) The conflict of interest between managers and shareholders
,C) The difficulty in finding a reliable insurance agent
D) The problem of managing government regulations
4. A market where new securities are originally issued is
known as the:
A) Secondary market
B) Primary market
C) Tertiary market
D) Dealer market
5. Which of the following is a key advantage of the corporate
form of business organization?
A) Ease of formation
B) Unlimited liability for owners
C) Limited life of the enterprise
D) Limited liability for owners
Part 2: Financial Statements and Cash Flow Analysis
6. Which financial statement provides a snapshot of a firm's
financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
7. The accounting equation is defined as:
A) Assets = Liabilities + Shareholders' Equity
,B) Revenues - Expenses = Profit
C) Assets = Revenues - Expenses
D) Liabilities = Assets + Equity
8. Net Income is calculated as:
A) Revenues - Cost of Goods Sold
B) Revenues - Expenses - Taxes
C) Revenues - Expenses + Depreciation
D) Gross Profit - Selling & Administrative Expenses
9. A firm's operating cash flow (OCF) is best defined as the
cash flow generated by:
A) Issuing new debt
B) The firm's normal business operations
C) Selling fixed assets
D) Issuing new equity
10. Depreciation is considered a non-cash charge, which
means it:
A) Does not affect taxes
B) Reduces taxable income but does not involve an actual cash
outflow
C) Increases the cash balance directly
D) Is not recorded on the income statement
Part 3: The Time Value of Money
, 11. The concept that a dollar today is worth more than a dollar
in the future is known as:
A) The risk-return tradeoff
B) The time value of money
C) Compounding
D) Discounting
12. What is the future value (FV) of $1,000 invested today at
10% interest for 5 years?
A) $1,500
B) $1,610.51
C) $1,464.10
D) $1,000
*(FV = $1,000 x (1.10)^5 = $1,000 x 1.61051 = $1,610.51)*
13. What is the present value (PV) of $1,000 to be received in
5 years, discounted at 10%?
A) $620.92
B) $1,000.00
C) $1,610.51
D) $683.01
*(PV = $1,000 / (1.10)^5 = $1,.61051 ≈ $620.92)*
14. A series of equal, periodic cash flows is called a(n):
A) Perpetuity
B) Annuity
Management thirteenth edition James C. Van
Horne
Solutions Manual: Fundamentals of Financial Management
(Van Horne Style) - Q&A
Part 1: The Scope and Environment of Financial Management
1. What is the primary goal of the financial manager?
A) Maximize sales
B) Maximize market share
C) Maximize the wealth of the shareholders
D) Minimize costs
2. The key decision-making area of finance concerned with a
firm's fixed asset acquisition is called:
A) Working capital management
B) Capital budgeting
C) Capital structure theory
D) The dividend decision
3. The term "agency problem" refers to:
A) The problem of ensuring the company pays no taxes
B) The conflict of interest between managers and shareholders
,C) The difficulty in finding a reliable insurance agent
D) The problem of managing government regulations
4. A market where new securities are originally issued is
known as the:
A) Secondary market
B) Primary market
C) Tertiary market
D) Dealer market
5. Which of the following is a key advantage of the corporate
form of business organization?
A) Ease of formation
B) Unlimited liability for owners
C) Limited life of the enterprise
D) Limited liability for owners
Part 2: Financial Statements and Cash Flow Analysis
6. Which financial statement provides a snapshot of a firm's
financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
7. The accounting equation is defined as:
A) Assets = Liabilities + Shareholders' Equity
,B) Revenues - Expenses = Profit
C) Assets = Revenues - Expenses
D) Liabilities = Assets + Equity
8. Net Income is calculated as:
A) Revenues - Cost of Goods Sold
B) Revenues - Expenses - Taxes
C) Revenues - Expenses + Depreciation
D) Gross Profit - Selling & Administrative Expenses
9. A firm's operating cash flow (OCF) is best defined as the
cash flow generated by:
A) Issuing new debt
B) The firm's normal business operations
C) Selling fixed assets
D) Issuing new equity
10. Depreciation is considered a non-cash charge, which
means it:
A) Does not affect taxes
B) Reduces taxable income but does not involve an actual cash
outflow
C) Increases the cash balance directly
D) Is not recorded on the income statement
Part 3: The Time Value of Money
, 11. The concept that a dollar today is worth more than a dollar
in the future is known as:
A) The risk-return tradeoff
B) The time value of money
C) Compounding
D) Discounting
12. What is the future value (FV) of $1,000 invested today at
10% interest for 5 years?
A) $1,500
B) $1,610.51
C) $1,464.10
D) $1,000
*(FV = $1,000 x (1.10)^5 = $1,000 x 1.61051 = $1,610.51)*
13. What is the present value (PV) of $1,000 to be received in
5 years, discounted at 10%?
A) $620.92
B) $1,000.00
C) $1,610.51
D) $683.01
*(PV = $1,000 / (1.10)^5 = $1,.61051 ≈ $620.92)*
14. A series of equal, periodic cash flows is called a(n):
A) Perpetuity
B) Annuity
