TESTBANK - Foundations of Financial Management, 17
Edition by Block
Chapter 1 The Goals and Activities of Financial Management
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
investments.
Answer: FALSE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) Real capital is composed of long-term plant and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
,Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) Recently, the emphasis of financial management has been on the relationship between risk and
return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) The first Nobel Prizes given to finance professors were for their contributions to capital
structure theory and portfolio theories of risk and return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
, AACSB:
ReflectiveXVThinkingXVAc
cessibility: KeyboardXVNavigation
9) HowXVinvestorsXVhandleXVriskXVisXVanXVimportantXVtopicXVthatXVusuallyXVonlyXVeconomistsXVobserve.
Answer:X V X V FALSE
Explanation:
BehavioralXVfinanceXVisXVsomethingXVthatXVtheXVfinanceXVindustryXVputsXVheavyXVemp
hasisXVon.XVDifficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
LearningXVObjective: 01-
01XVTheXVfieldXVofXVfinanceXVintegratesXVconceptsXVfromXVeconomics,XVaccounting,XVandXVaXVnumberXV
ofXVotherXVareas.
Bloom's:
RememberX V AACS
B:
X
VReflectiveXVThinkin
g
Accessibility: KeyboardXVNavigation
10) Mortgage-
backedXVsecuritiesXVwereXVdevaluedXVbyXVaccountingXVstandardsXVbecauseXVofXVtheXVhighXVcreditXVratin
gsXV(AAA).
Answer:X V X V FALSE
Explanation:X V TheseXVsecuritiesXVwereXVdevaluedXVbecauseXVborrowersXVdefaultedXVonXVtheirXVloa
nsXVandXVdidn'tXVhaveXVtheXVfinancialXVmeansXVtoXVbackXVupXVtheirXVloansXVinXVotherXVways.
Difficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
LearningXVObjective: 01-
01XVTheXVfieldXVofXVfinanceXVintegratesXVconceptsXVfromXVeconomics,XVaccounting,XVandXVaXVnumberXV
ofXVotherXVareas.
Bloom's:
RememberX V AACS
B:
X
VReflectiveXVThinkin
g
Accessibility: KeyboardXVNavigation
11) "CreditXVdefaultXVswaps"XVareXVoneXVofXVseveralXVtoolsXVthatXVCongressXVandXVtheXVPresidentXVof
XVtheXVUnitedXVStatesXVhaveXVjointlyXVdevelopedXVtoXVeaseXVtheXVfinancialXVcrisisXVthatXVbeganXVinXV2
008.
Answer:X V FALSEXV
Difficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
Edition by Block
Chapter 1 The Goals and Activities of Financial Management
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
investments.
Answer: FALSE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) Real capital is composed of long-term plant and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
,Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) Recently, the emphasis of financial management has been on the relationship between risk and
return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) The first Nobel Prizes given to finance professors were for their contributions to capital
structure theory and portfolio theories of risk and return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
, AACSB:
ReflectiveXVThinkingXVAc
cessibility: KeyboardXVNavigation
9) HowXVinvestorsXVhandleXVriskXVisXVanXVimportantXVtopicXVthatXVusuallyXVonlyXVeconomistsXVobserve.
Answer:X V X V FALSE
Explanation:
BehavioralXVfinanceXVisXVsomethingXVthatXVtheXVfinanceXVindustryXVputsXVheavyXVemp
hasisXVon.XVDifficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
LearningXVObjective: 01-
01XVTheXVfieldXVofXVfinanceXVintegratesXVconceptsXVfromXVeconomics,XVaccounting,XVandXVaXVnumberXV
ofXVotherXVareas.
Bloom's:
RememberX V AACS
B:
X
VReflectiveXVThinkin
g
Accessibility: KeyboardXVNavigation
10) Mortgage-
backedXVsecuritiesXVwereXVdevaluedXVbyXVaccountingXVstandardsXVbecauseXVofXVtheXVhighXVcreditXVratin
gsXV(AAA).
Answer:X V X V FALSE
Explanation:X V TheseXVsecuritiesXVwereXVdevaluedXVbecauseXVborrowersXVdefaultedXVonXVtheirXVloa
nsXVandXVdidn'tXVhaveXVtheXVfinancialXVmeansXVtoXVbackXVupXVtheirXVloansXVinXVotherXVways.
Difficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
LearningXVObjective: 01-
01XVTheXVfieldXVofXVfinanceXVintegratesXVconceptsXVfromXVeconomics,XVaccounting,XVandXVaXVnumberXV
ofXVotherXVareas.
Bloom's:
RememberX V AACS
B:
X
VReflectiveXVThinkin
g
Accessibility: KeyboardXVNavigation
11) "CreditXVdefaultXVswaps"XVareXVoneXVofXVseveralXVtoolsXVthatXVCongressXVandXVtheXVPresidentXVof
XVtheXVUnitedXVStatesXVhaveXVjointlyXVdevelopedXVtoXVeaseXVtheXVfinancialXVcrisisXVthatXVbeganXVinXV2
008.
Answer:X V FALSEXV
Difficulty:XV1XVEasy
Topic:X V X V IntroductionXVtoXVcorporateXVfinance
