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, TEST BANK For Fundamentals o2 Corporate
Finance, 13th Edition by Ross, Wester2ield,
Chapters 1 - 27, Complete
Version 1 1
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,Version 1 3
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, TEST BANK FOR
Fundamentals of Corporate Finance, 13th Edition Ross
INTRODUCTION TO CORPORATE FINANCE
Q1.
Which of the following best defines the primary financial goal of corporate managers?
A) Maximizing accounting profits
B) Maximizing market share
C) Maximizing the current market value of equity
D) Maximizing retained earnings
Answer: C
Rationale: The central objective of financial management is shareholder wealth maximization, which is measured by t
current market value of equity (stock price). Accounting profits or retained earnings may rise even when value
decreases, so they are misleading goals.
Q2.
A financial manager deciding whether to acquire a new manufacturing facility is making which type of decision?
A) Working capital management
B) Capital structure
C) Capital budgeting
D) Financial leverage
Answer: C
Rationale: Capital budgeting involves long-term investment decisions, such as whether to acquire a plant or machine. It
differs from capital structure (financing choice) and working capital management (short-term assets and liabilities).
Q3.
Which one of the following actions reflects a capital structure decision?
A) Choosing between issuing bonds or equity to finance expansion
B) Setting the firm’s dividend payout ratio
C) Determining how much inventory to hold
D) Deciding which supplier to contract for raw materials
Answer: A
Rationale: Capital structure refers to the mix of debt and equity financing. Issuing bonds vs. stock directly affects
leverage. Dividend policy is related but not capital structure, while inventory and suppliers fall under working capital.
Q4.
Downloaded by Collins Mwaniki ()
, TEST BANK For Fundamentals o2 Corporate
Finance, 13th Edition by Ross, Wester2ield,
Chapters 1 - 27, Complete
Version 1 1
Downloaded by Collins Mwaniki ()
,Version 1 3
Downloaded by Collins Mwaniki ()
, TEST BANK FOR
Fundamentals of Corporate Finance, 13th Edition Ross
INTRODUCTION TO CORPORATE FINANCE
Q1.
Which of the following best defines the primary financial goal of corporate managers?
A) Maximizing accounting profits
B) Maximizing market share
C) Maximizing the current market value of equity
D) Maximizing retained earnings
Answer: C
Rationale: The central objective of financial management is shareholder wealth maximization, which is measured by t
current market value of equity (stock price). Accounting profits or retained earnings may rise even when value
decreases, so they are misleading goals.
Q2.
A financial manager deciding whether to acquire a new manufacturing facility is making which type of decision?
A) Working capital management
B) Capital structure
C) Capital budgeting
D) Financial leverage
Answer: C
Rationale: Capital budgeting involves long-term investment decisions, such as whether to acquire a plant or machine. It
differs from capital structure (financing choice) and working capital management (short-term assets and liabilities).
Q3.
Which one of the following actions reflects a capital structure decision?
A) Choosing between issuing bonds or equity to finance expansion
B) Setting the firm’s dividend payout ratio
C) Determining how much inventory to hold
D) Deciding which supplier to contract for raw materials
Answer: A
Rationale: Capital structure refers to the mix of debt and equity financing. Issuing bonds vs. stock directly affects
leverage. Dividend policy is related but not capital structure, while inventory and suppliers fall under working capital.
Q4.
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