Test Bank for Fundamentals of Corporate Finance 5th Edition by Robert Parrino, Thomas W. Bates & Stuart L. Gillan , ISBN: 9781119795438 |All Chapters Verified| Guide A+

TEST BANK
Test Bank for Fundamentals of Corporate Finance
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Parrino; Bates; Gillan; Kidwell
5th Edition
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KS
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LU
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, Chapter 1-21
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Chapter 1 The Financial Manager and the Firm

1) The financial manager is responsible for making decisions that are in the best interests of the
firm's owners.
Answer: TRUE
Diff: 1
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Learning Objective: LO 1
Bloomcode: Knowledge
TB
AACSB: Analytic
IMA: FSA
AICPA: Process and Resource Management Perspectives

2) A patent is a productive asset for a technology-based firm.
Answer: TRUE
A
Diff: 1
Learning Objective: LO 1
N
Bloomcode: Knowledge
AACSB: Analytic
IMA: Business Economics
KS
AICPA: Global and Industry Perspectives

3) Intangible assets generate most of a manufacturing firm's cash flows.
Answer: FALSE
Diff: 2
Learning Objective: LO 1
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Bloomcode: Application
AACSB: Analytic
IMA: Corporate Finance
LU
AICPA: Process and Resource Management Perspectives

4) The most fundamental way a business can grow in size is by reinvesting cash flows or earnings.
Answer: TRUE
Diff: 1
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Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: FSA
O
AICPA: Process and Resource Management Perspectives
N
S

, 5) A firm that goes bankrupt will always be liquidated.
Answer: FALSE
Diff: 2
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Learning Objective: LO 1
Bloomcode: Application
AACSB: Analytic
IMA: Corporate Finance
AICPA: Resource Management
S

6) Capital assets are generally short term in nature.
Answer: FALSE
TB
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: Corporate Finance
A
AICPA: Process and Resource Management Perspectives

7) A good capital budgeting or investment decision is one in which the benefits are worth more to
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the firm than the cost of the project.
Answer: TRUE
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Explanation: Regardless of the project, a good investment is one in which the benefits are worth
more to the firm than the costs of the asset.
Diff: 2
Learning Objective: LO 1
Bloomcode: Analysis
AACSB: Analytic
O
IMA: Budget Preparation
AICPA: Resource Management
LU
8) Investment decisions determine how firms raise capital to pay for their investments.
Answer: FALSE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
TI
AACSB: Analytic
IMA: Investment Decisions
AICPA: Strategic/Critical Thinking
O
9) Net working capital is the dollar difference between a firm's total current assets and total
liabilities.
Answer: FALSE
N
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
S
AACSB: Analytic
IMA: Budget Preparation
AICPA: Process and Resource Management Perspectives

, 10) A sole proprietorship is a business where ownership interest can be transferred to someone
else.
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Answer: FALSE
Diff: 1
Learning Objective: LO 2
Bloomcode: Knowledge
AACSB: Analytic
S
IMA: Business Economics
AICPA: Global and Industry Perspectives
TB
11) One of the disadvantages of a general partnership is the double taxation of profits.
Answer: FALSE
Diff: 1
Learning Objective: LO 2
Bloomcode: Comprehension
A
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives
N

12) Unlimited liability means that the owner of a firm is responsible for paying all the bills of the
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firm in the event of a bankruptcy.
Answer: TRUE
Diff: 2
Learning Objective: LO 2
Bloomcode: Application
AACSB: Analytic
O
IMA: Business Economics
AICPA: Global and Industry Perspectives
LU
13) The process of transferring ownership of a sole proprietorship is relatively easy compared to a
public corporation.
Answer: FALSE
Diff: 1
Learning Objective: LO 2
TI
Bloomcode: Comprehension
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives
O
14) General partners in a business have limited liability with regard to money owed to creditors.
Answer: FALSE
N
Diff: 1
Learning Objective: LO 2
Bloomcode: Comprehension
S
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives