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Fundamentals of Corporate Finance, 5th Edition by Robert Parrino, David Kidwell, Bates &
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Gillan. ISBN 9781119795438
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Chapter 1-21 nb
1
,Chapter 1 nb The Financial Manager and the Firm
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1) The financial manager is responsible for making decisions that are in the best interests of
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the firm's owners.
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Answer: TRUE n b
Diff: 1
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Learning Objective: LO 1nb n b nb
Bloomcode: Knowledge
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AACSB: Analytic
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IMA: FSA n b n b
AICPA: Process and Resource Management Perspectives
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2) A patent is a productive asset for a technology-based
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firm. Answer: TRUE
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Diff: 1 nb
Learning Objective: LO 1nb n b nb
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
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flows. Answer: FALSE
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Diff: 2 nb
Learning Objective: LO 1nb n b nb
Bloomcode: Application
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AACSB: Analytic
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IMA: Corporate Finance
n b n b nb
AICPA: Process and Resource Management Perspectives
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4) The most fundamental way a business can grow in size is by reinvesting cash flows or
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earnings. Answer: TRUE
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Diff: 1 nb
Learning Objective: LO 1nb n b nb
Bloomcode: Knowledge
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AACSB: Analytic
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IMA: FSA n b n b
AICPA: Process and Resource Management Perspectives
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2
,5) A firm that goes bankrupt will always be
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liquidated. Answer: FALSE
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Diff: 2
nb
Learning Objective: LO 1
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Bloomcode: Application
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AACSB: Analytic
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IMA: Corporate Finance
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AICPA: Resource
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Management
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6) Capital assets are generally short term in
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nature. Answer: FALSE
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Diff: 1
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Learning Objective: LO 1
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Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Corporate Finance
n b n b nb
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
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more to the firm than the cost of the project.
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Answer: TRUE n b n b
Explanation: Regardless of the project, a good investment is one in which the benefits are
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worth more to the firm than the costs of the asset.
nb nb nb nb nb nb nb nb nb nb nb
Diff: 2
nb
Learning Objective: LO 1
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Bloomcode: Analysis
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AACSB: Analytic
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IMA: Budget Preparation
n b nb
AICPA: Resource
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Management
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8) Investment decisions determine how firms raise capital to pay for their
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investments. Answer: FALSE
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Diff: 1
nb
Learning Objective: LO 1
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Bloomcode: Knowledge
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AACSB: Analytic
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IMA: Investment Decisions
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AICPA: Strategic/Critical
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Thinking
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9) Net working capital is the dollar difference between a firm's total current assets and
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total liabilities.
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Answer: FALSE n b
Diff: 1
nb nb
Learning Objective: LO 1
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Bloomcode: Knowledge
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3
, AACSB: Analytic
nb n b
IMA: Budget Preparation
n b n b nb
AICPA: Process and Resource Management Perspectives
n b n b nb nb nb nb
4
Fundamentals of Corporate Finance, 5th Edition by Robert Parrino, David Kidwell, Bates &
nb nb nb nb nb nb nb nb nb nb nb nb
Gillan. ISBN 9781119795438
nb nb nb
Chapter 1-21 nb
1
,Chapter 1 nb The Financial Manager and the Firm
nb nb nb nb nb
1) The financial manager is responsible for making decisions that are in the best interests of
nb nb nb nb nb nb nb nb nb nb nb nb nb nb
the firm's owners.
nb nb nb
Answer: TRUE n b
Diff: 1
nb nb
Learning Objective: LO 1nb n b nb
Bloomcode: Knowledge
nb n b
AACSB: Analytic
nb n b
IMA: FSA n b n b
AICPA: Process and Resource Management Perspectives
n b n b nb nb nb nb
2) A patent is a productive asset for a technology-based
nb nb nb nb nb nb nb nb
firm. Answer: TRUE
nb nb n b
Diff: 1 nb
Learning Objective: LO 1nb n b nb
Bloomcode: Knowledge
nb n b
AACSB: Analytic
nb n b
IMA: Business Economics
n b n b nb
AICPA: Global and Industry Perspectives
n b n b nb nb nb
3) Intangible assets generate most of a manufacturing firm's cash
nb nb nb nb nb nb nb nb
flows. Answer: FALSE
nb nb n b
Diff: 2 nb
Learning Objective: LO 1nb n b nb
Bloomcode: Application
nb n b
AACSB: Analytic
nb n b
IMA: Corporate Finance
n b n b nb
AICPA: Process and Resource Management Perspectives
n b n b nb nb nb nb
4) The most fundamental way a business can grow in size is by reinvesting cash flows or
nb nb nb nb nb nb nb nb nb nb nb nb nb nb nb
earnings. Answer: TRUE
nb nb n b
Diff: 1 nb
Learning Objective: LO 1nb n b nb
Bloomcode: Knowledge
nb n b
AACSB: Analytic
nb n b
IMA: FSA n b n b
AICPA: Process and Resource Management Perspectives
n b n b nb nb nb nb
2
,5) A firm that goes bankrupt will always be
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liquidated. Answer: FALSE
nb nb n b
Diff: 2
nb
Learning Objective: LO 1
nb n b nb
Bloomcode: Application
nb n b
AACSB: Analytic
nb n b
IMA: Corporate Finance
n b nb
AICPA: Resource
nb n b
Management
nb
6) Capital assets are generally short term in
nb nb nb nb nb nb
nature. Answer: FALSE
nb nb n b
Diff: 1
nb
Learning Objective: LO 1
nb n b nb
Bloomcode: Knowledge
nb n b
AACSB: Analytic
nb n b
IMA: Corporate Finance
n b n b nb
AICPA: Process and Resource Management Perspectives
n b n b nb nb nb nb
7) A good capital budgeting or investment decision is one in which the benefits are worth
nb nb nb nb nb nb nb nb nb nb nb nb nb nb
more to the firm than the cost of the project.
nb nb nb nb nb nb nb nb nb nb
Answer: TRUE n b n b
Explanation: Regardless of the project, a good investment is one in which the benefits are
n b nb nb nb nb nb nb nb nb nb nb nb nb nb
worth more to the firm than the costs of the asset.
nb nb nb nb nb nb nb nb nb nb nb
Diff: 2
nb
Learning Objective: LO 1
nb n b nb
Bloomcode: Analysis
nb n b
AACSB: Analytic
nb n b
IMA: Budget Preparation
n b nb
AICPA: Resource
nb n b
Management
nb
8) Investment decisions determine how firms raise capital to pay for their
nb nb nb nb nb nb nb nb nb nb
investments. Answer: FALSE
nb nb n b
Diff: 1
nb
Learning Objective: LO 1
nb n b nb
Bloomcode: Knowledge
nb n b
AACSB: Analytic
nb n b
IMA: Investment Decisions
n b nb
AICPA: Strategic/Critical
nb n b
Thinking
nb
9) Net working capital is the dollar difference between a firm's total current assets and
nb nb nb nb nb nb nb nb nb nb nb nb nb
total liabilities.
nb nb
Answer: FALSE n b
Diff: 1
nb nb
Learning Objective: LO 1
nb n b nb
Bloomcode: Knowledge
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3
, AACSB: Analytic
nb n b
IMA: Budget Preparation
n b n b nb
AICPA: Process and Resource Management Perspectives
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4