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Test Bank for Fundamentals of Financial Management, 16th Edition by Eugene F. Brigham

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Test Bank for Fundamentals of Financial Management 16e 16th Edition by Eugene F. Brigham, Joel F. Houston. ISBN-13: 7574 Full Chapters test bank included Part 1: Introduction to Financial Management Chapter 1: An Overview of Financial Management Putting Things in Perspective 1-1: What is Finance? 1-2: Jobs in Finance 1-3: Forms of Business Organization 1-4: The Main Financial Goal: Creating Value for Investors 1-5: Stockholder–Manager Conflicts 1-6: Stockholder–Debtholder Conflicts 1-7: Balancing Shareholder Interests and the Interests of Society 1-8: Business Ethics Tying It All Together Chapter 2: Financial Markets and Institutions Putting Things in Perspective 2-1: The Capital Allocation Process 2-2: Financial Markets 2-3: Financial Institutions 2-4: The Stock Market 2-5: The Market for Common Stock 2-6: Stock Markets and Returns 2-7: Stock Market Efficiency Tying It All Together Integrated Case: Smyth Barry & Company Part 2: Fundamental Concepts in Financial Management Chapter 3: Financial Statements, Cash Flow, and Taxes Putting Things in Perspective 3-1: Financial Statements and Reports 3-2: The Balance Sheet 3-3: The Income Statement 3-4: Statement of Cash Flows 3-5: Statement of Stockholders’ Equity 3-6: Uses and Limitations of Financial Statements 3-7: Free Cash Flow 3-8: MVA and EVA 3-9: Income Taxes Tying It All Together Integrated Case: D’Leon Inc., Part I Chapter 4: Analysis of Financial Statements Putting Things in Perspective 4-1: Ratio Analysis 4-2: Liquidity Ratios 4-3: Asset Management Ratios 4-4: Debt Management Ratios 4-5: Profitability Ratios 4-6: Market Value Ratios 4-7: Tying the Ratios Together: The DuPont Equation 4-8: Potential Misuses of ROE 4-9: Using Financial Ratios to Assess Performance 4-10: Uses and Limitations of Ratios 4-11: Looking Beyond the Numbers Tying It All Together Integrated Case: D’Leon Inc., Part II Chapter 5: Time Value of Money Putting Things in Perspective 5-1: Time Lines 5-2: Future Values 5-3: Present Values 5-4: Finding the Interest Rate, I 5-5: Finding the Number of Years, N 5-6: Annuities 5-7: Future Value of an Ordinary Annuity 5-8: Future Value of an Annuity Due 5-9: Present Value of an Ordinary Annuity 5-10: Finding Annuity Payments, Periods, and Interest Rates 5-11: Perpetuities 5-12: Uneven Cash Flows 5-13: Future Value of an Uneven Cash Flow Stream 5-14: Solving for I with Uneven Cash Flows 5-15: Semiannual and Other Compounding Periods 5-16: Comparing Interest Rates 5-17: Fractional Time Periods 5-18: Amortized Loans Tying It All Together Integrated Case: First National Bank Part 3: Financial Assets Chapter 6: Interest Rates Putting Things in Perspective 6-1: The Cost of Money 6-2: Interest Rate Levels 6-3: The Determinants of Market Interest Rates 6-4: The Term Structure of Interest Rates 6-5: What Determines the Shape of the Yield Curve? 6-6: Using the Yield Curve to Estimate Future Interest Rates 6-7: Macroeconomic Factors That Influence Interest Rate Levels 6-8: Interest Rates and Business Decisions Tying It All Together IIntegrated Case: Morton Handley & Company Chapter 7: Bonds and Their Valuation Putting Things in Perspective 7-1: Who Issues Bonds? 7-2: Key Characteristics of Bonds 7-3: Bond Valuation 7-4: Bond Yields 7-5: Changes in Bond Values over Time 7-6: Bonds with Semiannual Coupons 7-7: Assessing a Bond’s Riskiness 7-8: Default Risk 7-9: Bond Markets Tying It All Together Integrated Case: Western Money Management Inc. Chapter 8: Risk and Rates of Return Putting Things in Perspective 8-1: The Risk-Return Trade-Off 8-2: Stand-Alone Risk 8-3: Risk in a Portfolio Context: The CAPM 8-4: The Relationship between Risk and Rates of Return 8-5: Some Concerns about Beta and the CAPM 8-6: Some Concluding Thoughts: Implications for Corporate Managers and Investors Tying It All Together Integrated Case: Merrill Finch Inc. Chapter 9: Stocks and Their Valuation Putting Things in Perspective 9-1: Legal Rights and Privileges of Common Stockholders 9-2: Types of Common Stock 9-3: Stock Price versus Intrinsic Value 9-4: The Discounted Dividend Model 9-5: Constant Growth Stocks 9-6: Valuing Nonconstant Growth Stocks 9-7: Enterprise-Based Approach to Valuation 9-8: Preferred Stock Tying It All Together Integrated Case: Mutual of Chicago Insurance Company Part 4: Investing in Long-Term Assets: Capital Budgeting Chapter 10: The Cost of Capital Putting Things in Perspective 10-1: An Overview of the Weighted Average Cost of Capital (WACC) 10-2: Basic Definitions 10-3: Cost of Debt, rd(12T) 10-4: Cost of Preferred Stock, rp 10-5: Cost of Retained Earnings, rs 10-6: Cost of New Common Stock, re 10-7: Composite, or Weighted Average, Cost of Capital, WACC 10-8: Factors That Affect the WACC 10-9: Adjusting the Cost of Capital for Risk 10-10: Some Other Problems with Cost of Capital Estimates Tying It All Together IIntegrated Case: Coleman Technologies Inc. Chapter 11: The Basics of Capital Budgeting Putting Things in Perspective 11-1: An Overview of Capital Budgeting 11-2: Net Present Value (NPV) 11-3: Internal Rate of Return (IRR) 11-4: Multiple Internal Rates of Return 11-5: Reinvestment Rate Assumptions 11-6: Modified Internal Rate of Return (MIRR) 11-7: NPV Profiles 11-8: Payback Period 11-9: Conclusions on Capital Budgeting Methods 11-10: Decision Criteria Used in Practice Tying It All Together IIntegrated Case: Allied Components Company Chapter 12: Cash Flow Estimation and Risk Analysis Putting Things in Perspective 12-1: Conceptual Issues in Cash Flow Estimation 12-2: Analysis of an Expansion Project 12-3: Replacement Analysis 12-4: Risk Analysis in Capital Budgeting 12-5: Measuring Stand-Alone Risk 12-6: Within-Firm and Beta Risk 12-7: Unequal Project Lives Tying It All Together Integrated Case: Allied Food Products Chapter 13: Real Options and Other Topics in Capital Budgeting Putting Things in Perspective 13-1: Introduction to Real Options 13-2: Growth (Expansion) Options 13-3: Abandonment/Shutdown Options 13-4: Investment Timing Options 13-5: Flexibility Options 13-6: The Optimal Capital Budget 13-7: The Post-Audit Tying It All Together IIntegrated Case: 21st Century Education Products Part 5: Capital Structure and Dividend Policy Chapter 14: Capital Structure and Leverage Putting Things in Perspective 14-1: Book, Market, or “Target” Weights? 14-2: Business and Financial Risk 14-3: Determining the Optimal Capital Structure 14-4: Capital Structure Theory 14-5: Checklist for Capital Structure Decisions 14-6: Variations in Capital Structures Tying It All Together Integrated Case: Campus Deli Inc. Chapter 15: Distributions to Shareholders: Dividends and Share Repurchases Putting Things in Perspective 15-1: Dividends versus Capital Gains: What Do Investors Prefer? 15-2: Other Dividend Policy Issues 15-3: Establishing the Dividend Policy in Practice 15-4: Dividend Reinvestment Plans 15-5: Summary of Factors Influencing Dividend Policy 15-6: Stock Dividends and Stock Splits 15-7: Stock Repurchases Tying It All Together Integrated Case: Southeastern Steel Company Part 6: Working Capital Management, Financial Forecasting, and Multinational Financial Management Chapter 16: Working Capital Management Putting Things in Perspective 16-1: Background on Working Capital 16-2: Current Assets Investment Policies 16-3: Current Assets Financing Policies 16-4: The Cash Conversion Cycle 16-5: The Cash Budget 16-6: Cash and Marketable Securities 16-7: Inventories 16-8: Accounts Receivable 16-9: Accounts Payable (Trade Credit) 16-10: Bank Loans 16-11: Commercial Paper 16-12: Accruals (Accrued Liabilities) 16-13: Use of Security in Short-Term Financing Tying It All Together Integrated Case: SKI Equipment Inc. Chapter 17: Financial Planning and Forecasting Putting Things in Perspective 17-1: Strategic Planning 17-2: The Sales Forecast 17-3: The AFN Equation 17-4: Forecasted Financial Statements 17-5: Using Regression to Improve Forecasts 17-6: Analyzing the Effects of Changing Ratios Tying It All Together Integrated Case: New World Chemicals Inc. Chapter 18: Multinational Financial Management Putting Things in Perspective 18-1: Multinational, or Global, Corporations 18-2: Multinational versus Domestic Financial Management 18-3: The International Monetary System 18-4: Foreign Exchange Rate Quotations 18-5: Trading in Foreign Exchange 18-6: Interest Rate Parity 18-7: Purchasing Power Parity 18-8: Inflation, Interest Rates, and Exchange Rates 18-9: International Money and Capital Markets 18-10: Investing Overseas 18-11: International Capital Budgeting 18-12: International Capital Structures Tying It All Together Integrated Case: Citrus Products Inc. Part 7: Special Topics in Financial Management Chapter 19: Derivatives and Risk Management Putting Things in Perspective 19-1: Reasons to Manage Risk 19-2: Background on Derivatives 19-3: Options 19-4: Introduction to Option Pricing Models 19-5: The Black-Scholes Option Pricing Model (OPM) 19-6: Forward and Futures Contracts 19-7: Other Types of Derivatives 19-8: Using Derivatives to Reduce Risks 19-9: Risk Management Tying It All Together Integrated Case: Tropical Sweets Inc. Chapter 20: Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles Putting Things in Perspective 20-1: Preferred Stock 20-2: Leasing 20-3: Warrants 20-4: Convertibles 20-5: A Final Comparison of Warrants and Convertibles 20-6: Reporting Earnings When Warrants or Convertibles Are Outstanding Tying It All Together Integrated Case: Fish & Chips Inc., Part I Integrated Case: Fish & Chips Inc., Part II Chapter 21: Mergers and Acquisitions Putting Things in Perspective 21-1: Rationale for Mergers 21-2: Types of Mergers 21-3: Level of Merger Activity 21-4: Hostile versus Friendly Takeovers 21-5: Merger Analysis 21-6: The Role of Investment Bankers 21-7: Do Mergers Create Value? The Empirical Evidence 21-8: Corporate Alliances 21-9: Private Equity Investments 21-10: Divestitures

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Fundamentals Of Financial Management

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Eugene F. Brigham, Joel F. Houston Fundamentals of Financial Management

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Institution: Fundamentals of Financial Management
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Uploaded on: February 7, 2025
Number of pages: 566
Written in: 2024/2025
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TEST BANK FOR Fundamentals of Financial Management 16th Editio
by Eugene F. Brigham and Joel F. Houston

,1. An Overview of Financial Management.
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True / False RC RC

Note that there is an overlap between the T/F and multiple-
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choice questions, as some of the T/F statements are used in multiple-choice questions.
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Multiple Choice: True/False RC RC

1. In most corporations, the CFO ranks under the CEO.
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a. True
b. False
ANSWER: True R C

2. The Chairman of the Board must also be the CEO.
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a. True
b. False
ANSWER: False R C

3. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ran
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king individual. The CEO generally works under the board and its chairman, and the board generally has the authorit
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y to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeav
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or to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneo
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usly serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offic
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es in the same person.
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a. True
b. False
ANSWER: True R C

4. Partnerships and proprietorships generally have a tax advantage over corporations.
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a. True
b. False
ANSWER: True R C

5. A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to pers
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onal liabilities in the event of bankruptcy than are investors in a typical partnership.
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a. True
b. False
ANSWER: False R C

6. An advantage of the corporate form of organization is that corporations are generally less highly re
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gulated than proprietorships and partnerships.
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a. True
b. False
ANSWER: False R C

,7. Some partners in a partnership may have different rights, privileges, and responsibilities than other partners.
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a. True

b. False
ANSWER: True R C

8. One advantage of the corporate form of organization is that it avoids double taxation.
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a. True
b. False
ANSWER: False R C

9. It is generally harder to transfer one's ownership interest in a partnership than in a corporation.
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a. True
b. False
ANSWER: True R C

10. One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bank
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rupt. This problem would be avoided if you formed a corporation to operate the business.
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a. True
b. False
ANSWER: True R C

11. If a corporation elects to be taxed as an S corporation, then it can avoid the corporate tax. However, its stoc
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kholders will have to pay personal taxes on the firm's net income.
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a. True
b. False
ANSWER: True R C

12. If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all Federal tax
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es. This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.
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a. True
b. False
ANSWER: False R C

13. It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, exte
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nsive legal documents are required.
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a. True
b. False
ANSWER: False R C

14. The more capital a firm is likely to require, the greater the probability that it will be organized as a corporation.
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a. True
b. False
ANSWER: True R C

, 15. One disadvantage of forming a corporation rather than a partnership is that this makes it more difficult for the f
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irm's investors to transfer their ownership interests.
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a. True

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