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Test Bank For Fundamentals Of Corporate Finance 1st Edition Parrino
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Test Bank For Fundamentals Of Corporate Finance 1st Edition Parrino
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Name: __________________________ Date: _____________1. The financial manager is responsible for making decisions that are in the best interest of
the firm's owners.
A) True
B) False
2. The demand for a potential business product, as well as the identification of what
product or services is to be produced, are both contained in a business plan.
A) True
B) False
3. The local Republican Party is a stakeholder in a local firm that makes no political
donations to either party.
A) True
B) False
4. A patent is a productive asset for a technology-based firm.
A) True
B) False
5. Intangible assets generate most of a firm's cash flows.
A) True
B) False
6. The most fundamental way that a business can grow in size is from the reinvestment of
cash flows or earnings.
A) True
B) False
7. When bankruptcy occurs, the firm will always be liquidated.
A) True
B) False
8. Capital assets are generally short term in nature.
A) True
B) False
Page 1
, 9. A good capital budgeting decision is one in which the benefits are worth more to the
firm than the cost of the asset.
A) True
B) False
10. The financing decision determines how firms raise cash to pay for their investments.
A) True
B) False
11. The dollar difference between current assets and liabilities is called working capital.
A) True
B) False
12. A sole proprietorship is an owner's only business.
A) True
B) False
13. The greatest number of businesses in the United States are corporations.
A) True
B) False
14. Unlimited liability means that the owner of a firm is responsible for paying all the firm's
bills.
A) True
B) False
15. The process of transferring ownership of a sole proprietorship is relatively easy.
A) True
B) False
16. General partners in a business have limited liability with regard to their firm's
obligations.
A) True
B) False
Page 2
, 17. Most large corporations are incorporated in New York because of its favorable tax
treatment of corporate income and its statutes protecting the rights of its owners.
A) True
B) False
18. Corporations do not have their income subject to double taxation.
A) True
B) False
19. Privately held corporations are allowed to have shareholders.
A) True
B) False
20. The treasurer of a corporation usually reports to the CFO of the firm.
A) True
B) False
21. The external auditors of the firm report their findings directly to the CFO of the firm.
A) True
B) False
22. Maximizing revenue should be the goal of the firm.
A) True
B) False
23. An agency problem can arise when the agent of the firm is the sole owner of the firm.
A) True
B) False
24. The owners of a firm are unaffected by agency costs.
A) True
B) False
25. Corruption in business does not affect the functioning of the financial markets.
A) True
B) False
Page 3
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