TEST BANK FOR Fundamentals of Financial Management 16th Edition by Eugene F. Brigham and Joel F. Houston

TESTBANK FOR Fundamentals of Financial Management 16th Edition
bg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgb g




by Eugene F. Brigham and Joel F. Houston
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg

,1. An Overview of Financial Management.
bgbg bgbg bgbg bgbg bgbg




True / False bgbg bgbg




Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




are
bgbg used in multiple-choice questions.
b g b g bgbg bgbg bgbg




Multiple Choice: True/False bgbg bgbg




1. In most corporations, the CFO ranks under the CEO.
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




2. The Chairman of the Board must also be the CEO.
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: False b g b g




3. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




highest
bgbg ranking individual. The CEO generally works under the board and its chairman, and the board
b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




generally has the
bgbg authority to remove the CEO under certain conditions. The CEO, however, cannot
bgbg bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




remove the board, but he or she
bgbg can endeavor to have the board voted out and a new board voted in
bgbg bgbg bgbg bgbg bgbg bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




should a conflict arise. It is possible for a
bgbg bgbg person to simultaneously serve as CEO and chairman of the
bgbg bgbg bgbg bgbg bgbg bgbg bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




board, though many corporate control experts believe
bgbg bgbg it is bad to vest both offices in the same person.
bgbg bgbg bgbg bgbg bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




4. Partnerships and proprietorships generally have a tax advantage over corporations. bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




5. A disadvantage of the corporate form of organization is that corporate stockholders are more
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




exposed to
bgbg personal liabilities in the event of bankruptcy than are investors in a typical
bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




partnership.
bgbg




a. True
b. False
ANSWER: False b g b g




6. An advantage of the corporate form of organization is that corporations are generally less
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




highly
bgbg regulated than proprietorships and partnerships.
b g b g bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: False b g b g

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




a. True

b. False
ANSWER: True b g b g




8. One advantage of the corporate form of organization is that it avoids double taxation.
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: False b g b g




9. It is generally harder to transfer one's ownership interest in a partnership than in a corporation.
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




10. One danger of starting a proprietorship is that you may be exposed to personal liability if the business
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




goes
bgbg bankrupt. This problem would be avoided if you formed a corporation to operate the business.
b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




11. If a corporation elects to be taxed as an S corporation, then it can avoid the corporate tax.
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




However, its
bgbg stockholders will have to pay personal taxes on the firm's net income.
bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: True b g b g




12. If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




Federal
bgbg taxes. This provision was put into the Federal Tax Code in order to encourage the
b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




formation of small
bgbg businesses. bgbg bgbg b g b g




a. True
b. False
ANSWER: False b g b g




13. It is generally less expensive to form a corporation than a proprietorship because, with a
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




proprietorship,
bgbg extensive legal documents are required. b g b g bgbg bgbg bgbg bgbg




a. True
b. False
ANSWER: False b g b g




14. The more capital a firm is likely to require, the greater the probability that it will be organized as a
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




corporation.
bgbg




a. True
b. False
ANSWER: True b g b g

, 15. One disadvantage of forming a corporation rather than a partnership is that this makes it more
bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg bgbg




difficult for
bgbg the firm's investors to transfer their ownership interests.
bgbg b g b g bgbg bgbg bgbg bgbg bgbg bgbg bgbg




a. True