Fundamentals of corporate finance, Brealey - Exam Preparation Test Bank (Downloadable Doc)

True / False Questions


1. The liability of sole proprietors is limited to the amount of their investment in the
company.
FALSE




AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3




2. General partners have limited personal liability for business debts in a limited
partnership.
FALSE




AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Medium
Learning Objective: 1-3




3. The separation of ownership and management is one distinctive feature of corporations.
TRUE




AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-3

,4. A major disadvantage of partnerships is that they have "double taxation" of profits.
FALSE




AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3

,5. Financial assets have value because they are claims on the firm's real assets and the cash
that those assets will produce.
TRUE




AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-2




6. Capital budgeting decisions are used to determine how to raise the cash necessary for
investments.
FALSE




AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-1




7. A successful investment is one that increases the value of the firm.
TRUE




AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-1

, 8. BP's committing of $500 million to partnership with University of California–Berkeley to
develop new sources of energy is a capital budgeting decision.
TRUE




AACSB: Reflective Thinking Skills
Bloom's: Application
Difficulty: Easy
Learning Objective: 1-1