Fundamentals Of Corporate Finance, 11th Edition by Thomas
Holloway Stephen A. Ross, Randolph W. Westerfield| TEST BANK
Verified Questions & 100% Accurate Solutions| All Chapters 1-26
All Answers are at the End of Each Chapter
St
ud
yS
Page | 1
H
, Chapter 1: Introduction to Corporate Finance
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The size, timing and risk of cash flows are important when evaluating a capital budgeting
decision.
⊚ true
⊚ false
2) A capital expenditure project becomes desirable when the project is worth more to the firm than
the cost to acquire it.
⊚ true
⊚ false
3) A capital expenditure project becomes desirable when the present value of the cash flow generated
by the project exceeds the project's present value of cost.
⊚ true
⊚ false
4) Optimal capital structure determines the least expensive sources of funds for the firm to borrow.
⊚ true
⊚ false
5) Optimal capital structure determines how much debt the firm should have in relation to its level of
equity.
⊚ true
⊚ false
6) Capital structure determines the level of current assets that is required to maintain the firm's
operations.
St
⊚ true
ud
⊚ false
yS
Page | 2
H
,7) Capital structure determines how much risk is associated with the future cash flows of a project.
⊚ true
⊚ false
8) Determining when a supplier should be paid is a capital structure decision.
⊚ true
⊚ false
9) Establishing the accounts receivable policies is a capital structure decision.
⊚ true
⊚ false
10) Determining the amount of money to borrow to finance a 10-year project is a capital structure
decision.
⊚ true
⊚ false
11) Deciding if a new project should be accepted is a working capital decision.
⊚ true
⊚ false
12) When evaluating a project in which a firm might invest, the size but not the timing of the cash
flows is important.
⊚ true
⊚ false
13) Working capital management addresses the firm's appropriate level of inventory.
St
⊚ true
ud
⊚ false
yS
Page | 3
H
, 14) Common stockholders or limited partners can lose, at most, what they have invested in a firm.
⊚ true
⊚ false
15) Partnership income is treated as personal income of the partners.
⊚ true
⊚ false
16) A limited partner can lose his or her investment in the partnership.
⊚ true
⊚ false
17) Maximization of the current earnings of the firm is the main goal of the financial manager.
⊚ true
⊚ false
18) The primary goal of a financial manager should be to maximize the value of shares issued to new
investors in the corporation.
⊚ true
⊚ false
19) The primary goal of financial management is to minimize the corporate tax liability.
⊚ true
⊚ false
St
20) Control of the firm ultimately rests with board of directors. They elect the management, who, in
turn, lead the company.
ud
⊚ true
yS
Page | 4
H
Holloway Stephen A. Ross, Randolph W. Westerfield| TEST BANK
Verified Questions & 100% Accurate Solutions| All Chapters 1-26
All Answers are at the End of Each Chapter
St
ud
yS
Page | 1
H
, Chapter 1: Introduction to Corporate Finance
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The size, timing and risk of cash flows are important when evaluating a capital budgeting
decision.
⊚ true
⊚ false
2) A capital expenditure project becomes desirable when the project is worth more to the firm than
the cost to acquire it.
⊚ true
⊚ false
3) A capital expenditure project becomes desirable when the present value of the cash flow generated
by the project exceeds the project's present value of cost.
⊚ true
⊚ false
4) Optimal capital structure determines the least expensive sources of funds for the firm to borrow.
⊚ true
⊚ false
5) Optimal capital structure determines how much debt the firm should have in relation to its level of
equity.
⊚ true
⊚ false
6) Capital structure determines the level of current assets that is required to maintain the firm's
operations.
St
⊚ true
ud
⊚ false
yS
Page | 2
H
,7) Capital structure determines how much risk is associated with the future cash flows of a project.
⊚ true
⊚ false
8) Determining when a supplier should be paid is a capital structure decision.
⊚ true
⊚ false
9) Establishing the accounts receivable policies is a capital structure decision.
⊚ true
⊚ false
10) Determining the amount of money to borrow to finance a 10-year project is a capital structure
decision.
⊚ true
⊚ false
11) Deciding if a new project should be accepted is a working capital decision.
⊚ true
⊚ false
12) When evaluating a project in which a firm might invest, the size but not the timing of the cash
flows is important.
⊚ true
⊚ false
13) Working capital management addresses the firm's appropriate level of inventory.
St
⊚ true
ud
⊚ false
yS
Page | 3
H
, 14) Common stockholders or limited partners can lose, at most, what they have invested in a firm.
⊚ true
⊚ false
15) Partnership income is treated as personal income of the partners.
⊚ true
⊚ false
16) A limited partner can lose his or her investment in the partnership.
⊚ true
⊚ false
17) Maximization of the current earnings of the firm is the main goal of the financial manager.
⊚ true
⊚ false
18) The primary goal of a financial manager should be to maximize the value of shares issued to new
investors in the corporation.
⊚ true
⊚ false
19) The primary goal of financial management is to minimize the corporate tax liability.
⊚ true
⊚ false
St
20) Control of the firm ultimately rests with board of directors. They elect the management, who, in
turn, lead the company.
ud
⊚ true
yS
Page | 4
H
