Test Bank for Foundations of Finance 10th Edition by Arthur J. Keown.

Med C Test Bank for Foundations of Finance 10th Edition by Arthur J. Keown Med C Foundations of Finance, 10e (Keown/Martin/Petty) Chapter 1 An Introduction to the Foundations of Financial Management Learning Objective 1.1 1) Financial management deals with the maintenance and creation of economic value or wealth. Answer: TRUE Diff: 1 Page Ref: 3 Keywords: Financial Management Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the corporation's stock price. Answer: FALSE Diff: 1 Page Ref: 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's shareholders. Answer: FALSE Diff: 1 Page Ref : 3 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 4) Shareholder wealth maximization means maximizing the price of the existing common stock. Answer: TRUE Diff: 1 Page Ref: 3 Med C Keywords: Shareholder Wealth, Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 5) It is important to evaluate a corporate manager's financial decision by measuring the effect the decision should have on the corporation's stock price if everything else were held constant. Answer: TRUE Diff: 2 Page Ref: 4 Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking Med C 6) Corporate managers should accept investment projects that maximize profits in the short run becaus e of the time value of money. Answer: FALSE Diff: 2 Page Ref: 4 Keywords: Goal of the Firm, Profits, Time Value of Money Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 7) The goal of the firm's financial managers should be the maximization of the total value of the firm's stock. Answer: TRUE Diff: 1 Page Ref: 3 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 8) The payment of a dividend to current shareholders will have no impact on a corporation's share price because the cash paid is not available to future potential shareholders who may want to buy the corporation's stock. Answer: FALSE Diff: 1 Page Ref : 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking 9) One problem with maximization of shareholder wealth as a goal is that it ignores risk taken by the firm's financial decisions. Answer: FALSE Diff: 1 Page Ref: 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking