Test Bank - Foundations of Finance: The Logic and Practice of Financial Management 10th Edition ( Keown, 2019) All Chapters

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Chapter 1 An Introduction to the Foundations of Financial Management
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Learning Objective 1.1 po po




1) Financial management deals with the maintenance and creation of economic value
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or wealth. Answer: TRUE
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Diff: 1 Page Ref: 3
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Keywords: Financial Management Learning Obj.: L.O. 1.1
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po AACSB: Reflective Thinking
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2) Each financial decision made by a corporate manager can be evaluated by its
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direct impact on the corporation's stock price.
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Answer: FALSE Diff: 1 po po po Page Ref: 4 po po




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
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3) The fundamental goal of a business is to maximize the retained earnings available to
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the corporation's shareholders.
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Answer: FALSE Diff: 1 po po po Page Ref: 3 po po




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
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,4) Shareholder wealth maximization means maximizing the price of the existing
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common stock. Answer: TRUE
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Diff: 1 Page Ref: 3
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Keywords: Shareholder Wealth, Goal of the Firm Learning Obj.: L.O. 1.1
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po AACSB: Reflective Thinkingpo po




5) It is important to evaluate a corporate manager's financial decision by measuring
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the effect the decision
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should have on the corporation's stock price if everything else were held constant.
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Answer: TRUE
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Diff: 2 Page Ref: 4
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Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning Obj.: L.O. 1.1
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po AACSB: Reflective Thinkingpo po




6) Corporate managers should accept investment projects that maximize profits in the
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short run because of the time value of money.
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Answer: FALSE Diff: 2po po po Page Ref: 4 po po




Keywords: Goal of the Firm, Profits, Time Value of Money Learning Obj.: L.O. 1.1
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po AACSB: Reflective Thinkingpo po

, 7) The goal of the firm's financial managers should be the maximization of the total
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value of the firm's stock.
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Answer: TRUE Diff: 1
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Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
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8) The payment of a dividend to current shareholders will have no impact on a
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corporation's share price because the cash paid is not available to future potential
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po shareholders who may want to buy the corporation's stock.
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Answer: FALSE Diff: 1
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Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
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9) One problem with maximization of shareholder wealth as a goal is that it ignores
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po risk taken by the firm's financial decisions.
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Answer: FALSE Diff: 1
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Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
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10) The goal of profit maximization ignores the risk of financial decisions. Answer: FALSE
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Diff: 1 Page Ref: 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective
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