Test Bank for Foundations of Finance 10th Edition by Arthur J. Keown, John D. Martin; J. William Petty

TEST BANK

,Foundations of Finance, 10e (Keown/Martin/Petty) SS SS SS SS




Chapter 1 An Introduction to the Foundations of Financial Management
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Learning Objective 1.1 SS SS




1) Financial management deals with the maintenance and creation of economic value or wealth.
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Answer: TRUE S S




Diff: 1 SS Page Ref: 3 SS SS




Keywords: Financial Management Learnin SS SS SS




g Obj.: L.O. 1.1
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AACSB: Reflective Thinking S S SS




2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the co
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rporation's stock price. SS SS




Answer: FALSE Dif SS SS




f: 1 SS Page Ref: 4 SS SS




Keywords: Goal of the Firm L SS SS SS SS SS




earning Obj.: L.O. 1.1 AACS SS SS SS SS




B: Reflective Thinking
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3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's sh
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areholders.
Answer: FALSE Dif SS SS




f: 1 SS Page Ref: 3 SS SS




Keywords: Goal of the Firm L SS SS SS SS SS




earning Obj.: L.O. 1.1 AACS SS SS SS SS




B: Reflective Thinking
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4) Shareholder wealth maximization means maximizing the price of the existing common stock. A
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nswer: TRUE S S




Diff: 1 SS Page Ref: 3 SS SS




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,Keywords: Shareholder Wealth, Goal of the Firm Lear
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ning Obj.: L.O. 1.1
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AACSB: Reflective Thinking S S SS




5) It is important to evaluate a corporate manager's financial decision by measuring the effect the decision
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should have on the corporation's stock price if everything else were held constant. Answ
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er: TRUE S S




Diff: 2 SS Page Ref: 4 SS SS




Keywords: Goal of the Firm, Maximize Shareholder Wealth Learnin
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g Obj.: L.O. 1.1
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AACSB: Reflective Thinking S S SS




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, 6) Corporate managers should accept investment projects that maximize profits in the short run because o
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f the time value of money.
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Answer: FALSE Dif SS SS




f: 2 SS Page Ref: 4 SS SS




Keywords: Goal of the Firm, Profits, Time Value of Money Learning
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Obj.: L.O. 1.1 SS SS




AACSB: Reflective Thinking S S SS




7) The goal of the firm's financial managers should be the maximization of the total value of the firm's st
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ock.
Answer: TRUE Dif S S SS




f: 1 SS Page Ref: 3 SS SS




Keywords: Goal of the Firm L SS SS SS SS SS




earning Obj.: L.O. 1.1 AACS SS SS SS SS




B: Reflective Thinking
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8) The payment of a dividend to current shareholders will have no impact on a corporation's share price be
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cause the cash paid is not available to future potential shareholders who may want to buy the corporation'
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s stock.
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Answer: FALSE Dif SS SS




f: 1 SS Page Ref: 4 SS SS




Keywords: Goal of the Firm L SS SS SS SS SS




earning Obj.: L.O. 1.1 AACS SS SS SS SS




B: Reflective Thinking
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9) One problem with maximization of shareholder wealth as a goal is that it ignores risk taken by the fir
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m's financial decisions.
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Answer: FALSE Dif SS SS




f: 1 SS Page Ref: 4 SS SS




Keywords: Goal of the Firm L SS SS SS SS SS




earning Obj.: L.O. 1.1 AACS SS SS SS SS




B: Reflective Thinking
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angelinas
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https://www.stuvia.com/user/angelinas