1 Copyright © 2018 Pearson Education, Ltd. Financial Management: Principles & Applications, 13e, Global Edition (Titman) Chapter 1 Getting Starte d-Principles of Finance 1) Which of the following statements best represents what finance is about? A) How political, social, and economic forces affect corporations B) Maximizing profits C) The study of how people and businesses make investment decisions and how to finance those decisions. D) Reducing risk Answer: C Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 2) From a financial point of view, a company that decides to devel op new product is making A) a financing decision. B) an investment decision. C) a capital structure decision. D) a cash flow decision. Answer: B Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 3) Working capital management refers to A) long-term financing decisions. B) the management of cash flows. C) investing in product development. D) capital structure. Answer: B Diff: 2 AACSB: 7. Application of knowledge Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: capital structure Principles: Principle 3: Cash flows are the source of value (Financial Management Principles and Applications, 13e (Global Edition) Sheridan Titman, Arthur Keown, John Martin)
(Test Bank all Chapters) 2 Copyright © 2018 Pearson Education, Ltd. 4) Finance managers need to interact constantly with A) marketing managers. B) accounting staff. C) management information systems staff. D) all of the above. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 5) The personal decision to take a year off from work to obtain a graduate degree in business is primarily a(n)________ decision. A) social B) financial C) ethical D) investment Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Revised Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 6) The area of finance that deals with l ong-term investment decisions is known as A) capital structure. B) working capital management. C) financial strategy. D) capital budgeting. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 3 Copyright © 2018 Pearson Education, Ltd. 7) Capital structure refers to the financing of long-term investments. Answer: TRUE Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 8) Financial decisions can be difficult because the cost of investments can be estimated with greater confidence than future payoffs. Answer: TRUE Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 9) What are the three basic questions addressed by the study of investments? Answer: 1. What investments should the firm undertake? 2. How should the firm fund these investments? 3. How can the firm best manage cas h flows in its day to day operations? Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 10) Which of the following is NOT an a dvantage of the sole proprietorship? A) Limited liability B) No time limit imposed on its existence C) No legal requirements for starting the business D) None of the above Answer: A Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: proprietorships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 4 Copyright © 2018 Pearson Education, Ltd. 11) What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form? A) Sole proprietorships are subj ect to double taxation of profits. B) The cost of formation. C) Inadequate profit sharing. D) Owners have unlimited liability. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: proprietorships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 12) Which of the following is NOT true for limited partnerships? A) Only limited partners can manage the business. B) One general partner must ex ist who has unlimited liability. C) Only the name of general partners can appear in the name of the firm. D) Limited partners may sell th eir interest in the company. Answer: A Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: partnerships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 13) The true owners of the corporation are the A) holders of debt issues of the firm. B) preferred stockholders. C) board of directors of the firm. D) common stockholders. Answer: D Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: corporation Principles: Principle 2: Th ere Is a Risk-Return Tradeoff
(Test Bank all Chapters) 2 Copyright © 2018 Pearson Education, Ltd. 4) Finance managers need to interact constantly with A) marketing managers. B) accounting staff. C) management information systems staff. D) all of the above. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 5) The personal decision to take a year off from work to obtain a graduate degree in business is primarily a(n)________ decision. A) social B) financial C) ethical D) investment Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Revised Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 6) The area of finance that deals with l ong-term investment decisions is known as A) capital structure. B) working capital management. C) financial strategy. D) capital budgeting. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 3 Copyright © 2018 Pearson Education, Ltd. 7) Capital structure refers to the financing of long-term investments. Answer: TRUE Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 8) Financial decisions can be difficult because the cost of investments can be estimated with greater confidence than future payoffs. Answer: TRUE Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 9) What are the three basic questions addressed by the study of investments? Answer: 1. What investments should the firm undertake? 2. How should the firm fund these investments? 3. How can the firm best manage cas h flows in its day to day operations? Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.1 Understand the importance of finance and identify the three primary business decisions that financial managers make. Keywords: what is finance? Principles: Principle 3: Cash flows are the source of value 10) Which of the following is NOT an a dvantage of the sole proprietorship? A) Limited liability B) No time limit imposed on its existence C) No legal requirements for starting the business D) None of the above Answer: A Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: proprietorships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 4 Copyright © 2018 Pearson Education, Ltd. 11) What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form? A) Sole proprietorships are subj ect to double taxation of profits. B) The cost of formation. C) Inadequate profit sharing. D) Owners have unlimited liability. Answer: D Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: proprietorships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 12) Which of the following is NOT true for limited partnerships? A) Only limited partners can manage the business. B) One general partner must ex ist who has unlimited liability. C) Only the name of general partners can appear in the name of the firm. D) Limited partners may sell th eir interest in the company. Answer: A Diff: 2 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: partnerships Principles: Principle 2: Th ere Is a Risk-Return Tradeoff 13) The true owners of the corporation are the A) holders of debt issues of the firm. B) preferred stockholders. C) board of directors of the firm. D) common stockholders. Answer: D Diff: 1 AACSB: 6. Reflective thinking Question Status: Previous edition Objective: 1.2 Identify the differences betw een the three major legal forms of business. Keywords: corporation Principles: Principle 2: Th ere Is a Risk-Return Tradeoff
