Fundamentals of Corporate Finance, 5th Edition by Robert , David , Bates & Gillan. (All Chapters 1-21) | TEST BANK

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Fundamentals of Corporate Finance, 5th Edition by Robert Parrino, David Kidwell, Bates & Gillan.
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ISBN 9781119795438
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Chapter 1-21 v




1

,Chapter 1 v The Financial Manager and theFirm
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1) The financial manager is responsible for making decisions that are in the best interests of the firm's
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owners.
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Answer: TRUE v




Diff: 1
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Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: FSA v v




AICPA: Process and Resource Management Perspectives
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2) A patent is a productive asset for a technology-based firm.
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Answer: TRUE
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Diff: 1 v




Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives
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3) Intangible assets generate most of a manufacturing firm's cash flows.
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Answer: FALSE
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Diff: 2 v




Learning Objective: LO 1 v v v




Bloomcode: Application
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AACSB: Analytic
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IMA: Corporate Finance
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AICPA: Process and Resource Management Perspectives
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4) Themostfundamental way a business can grow insizeis by reinvesting cash flows or earnings.
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Answer: TRUE
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Diff: 1 v




Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: FSA v v




AICPA: Process and Resource Management Perspectives
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2

,5) A firm that goes bankrupt will always be liquidated.
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Answer: FALSE
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Diff: 2 v




Learning Objective: LO 1 v v v




Bloomcode: Application
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AACSB: Analytic
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IMA: Corporate Finance v v




AICPA: ResourceManagement
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6) Capital assets are generally shortterm in nature.v v v v v v v




Answer: FALSE
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Diff: 1 v




Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Corporate Finance
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AICPA: Process and Resource Management Perspectives
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7) A good capital budgeting or investment decision is one in which the benefits are worth more to the
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firm than the cost of the project.
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Answer: TRUE v v




Explanation: Regardless of the project, a good investment is one in which the benefits are worth more to
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the firm than the costs of the asset.
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Diff: 2 v




Learning Objective: LO 1 v v v




Bloomcode: Analysis
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AACSB: Analytic
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IMA: Budget Preparation v v




AICPA: ResourceManagement
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8) Investment decisions determine how firms raise capital to pay for their investments.
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Answer: FALSE
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Diff: 1 v




Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Investment Decisions
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AICPA: Strategic/Critical Thinking
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9) Net working capital is the dollar difference between a firm's total current assets and total
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liabilities.
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Answer: FALSE v




Diff: 1
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Learning Objective: LO 1 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Budget Preparation
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AICPA: Process and Resource Management Perspectives
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3

, 10) A sole proprietorship is a business where ownership interest can be transferred to someone else.
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Answer: FALSE v




Diff: 1
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Learning Objective: LO 2 v v v




Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives v v v v v




11) One of the disadvantages of a general partnership is the double taxation of profits.
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Answer: FALSE
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Diff: 1 v




Learning Objective: LO 2 v v v




Bloomcode: Comprehension
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives v v v v v




12) Unlimited liability means that the owner of a firm is responsible for paying all the bills of the firm
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in the event of a bankruptcy.
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Answer: TRUE v




Diff: 2
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Learning Objective: LO 2 v v v




Bloomcode: Application
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives v v v v v




13) The process of transferring ownership of a sole proprietorship isrelatively easy compared to a
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public corporation.
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Answer: FALSE v




Diff: 1
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Learning Objective: LO 2 v v v




Bloomcode: Comprehension
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives v v v v v




14) General partners in a business have limited liability with regard to money owed to creditors.
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Answer: FALSE
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Diff: 1 v




Learning Objective: LO 2 v v v




Bloomcode: Comprehension
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AACSB: Analytic
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IMA: Business Economics
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AICPA: Global and Industry Perspectives v v v v v




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