,Chapter 1-26 Answers are at the Eand of Each Chapter
Chapter 1
Student name:
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
The size, timing and risk of cash flows are important when evaluating a capital budgeting
decision.
⊚ true
⊚ false
A capital expenditure project becomes desirable when the project is worth more to the firm
than the cost to acquire it.
⊚ true
⊚ false
A capital expenditure project becomes desirable when the present value of the cash flow
generated by the project exceeds the project's present value of cost.
⊚ true
⊚ false
Optimal capital structure determines the least expensive sources of funds for the firm to
borrow.
⊚ true
⊚ false
Optimal capital structure determines how much debt the firm should have in relation to its
level of equity.
⊚ true
⊚ false
Capital structure determines the level of current assets that is required to maintain the firm's
operations.
⊚ true
,Capital structure determines how much risk is associated with the future cash flows of a
project.
⊚ true
⊚ false
Determining when a supplier should be paid is a capital structure decision.
⊚ true
⊚ false
Establishing the accounts receivable policies is a capital structure decision.
⊚ true
⊚ false
Determining the amount of money to borrow to finance a 10-year project is a capital
structure decision.
⊚ true
⊚ false
Deciding if a new project should be accepted is a working capital decision.
⊚ true
⊚ false
When evaluating a project in which a firm might invest, the size but not the timing of the
cash flows is important.
⊚ true
⊚ false
Working capital management addresses the firm's appropriate level of inventory.
⊚ true
⊚ false
Common stockholders or limited partners can lose, at most, what they have invested in a
firm.
⊚ true
⊚ false
Partnership income is treated as personal income of the partners.
⊚ true
⊚ false
, A limited partner can lose his or her investment in the partnership.
⊚ true
⊚ false
Maximization of the current earnings of the firm is the main goal of the financial manager.
⊚ true
⊚ false
The primary goal of a financial manager should be to maximize the value of shares issued to
new investors in the corporation.
⊚ true
⊚ false
The primary goal of financial management is to minimize the corporate tax liability.
⊚ true
⊚ false
Control of the firm ultimately rests with board of directors. They elect the management, who, in
turn, lead the company.
⊚ true
⊚ false
The goal of financial managers does not imply that illegal or unethical actions should be
taken in the hope of increasing the value of the firm.
⊚ true
⊚ false
Unethical behaviour does not impact volatility of the stock markets.
⊚ true
⊚ false
The board of directors has the power to act on behalf of the shareholders to hire and fire the
operating management of the firm. In a legal sense, the directors are "principals" and the
shareholders are "agents".
⊚ true
⊚ false
When owners are managers (such as in a sole proprietorship), a firm will have agency costs.
⊚ true
⊚ false
Chapter 1
Student name:
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
The size, timing and risk of cash flows are important when evaluating a capital budgeting
decision.
⊚ true
⊚ false
A capital expenditure project becomes desirable when the project is worth more to the firm
than the cost to acquire it.
⊚ true
⊚ false
A capital expenditure project becomes desirable when the present value of the cash flow
generated by the project exceeds the project's present value of cost.
⊚ true
⊚ false
Optimal capital structure determines the least expensive sources of funds for the firm to
borrow.
⊚ true
⊚ false
Optimal capital structure determines how much debt the firm should have in relation to its
level of equity.
⊚ true
⊚ false
Capital structure determines the level of current assets that is required to maintain the firm's
operations.
⊚ true
,Capital structure determines how much risk is associated with the future cash flows of a
project.
⊚ true
⊚ false
Determining when a supplier should be paid is a capital structure decision.
⊚ true
⊚ false
Establishing the accounts receivable policies is a capital structure decision.
⊚ true
⊚ false
Determining the amount of money to borrow to finance a 10-year project is a capital
structure decision.
⊚ true
⊚ false
Deciding if a new project should be accepted is a working capital decision.
⊚ true
⊚ false
When evaluating a project in which a firm might invest, the size but not the timing of the
cash flows is important.
⊚ true
⊚ false
Working capital management addresses the firm's appropriate level of inventory.
⊚ true
⊚ false
Common stockholders or limited partners can lose, at most, what they have invested in a
firm.
⊚ true
⊚ false
Partnership income is treated as personal income of the partners.
⊚ true
⊚ false
, A limited partner can lose his or her investment in the partnership.
⊚ true
⊚ false
Maximization of the current earnings of the firm is the main goal of the financial manager.
⊚ true
⊚ false
The primary goal of a financial manager should be to maximize the value of shares issued to
new investors in the corporation.
⊚ true
⊚ false
The primary goal of financial management is to minimize the corporate tax liability.
⊚ true
⊚ false
Control of the firm ultimately rests with board of directors. They elect the management, who, in
turn, lead the company.
⊚ true
⊚ false
The goal of financial managers does not imply that illegal or unethical actions should be
taken in the hope of increasing the value of the firm.
⊚ true
⊚ false
Unethical behaviour does not impact volatility of the stock markets.
⊚ true
⊚ false
The board of directors has the power to act on behalf of the shareholders to hire and fire the
operating management of the firm. In a legal sense, the directors are "principals" and the
shareholders are "agents".
⊚ true
⊚ false
When owners are managers (such as in a sole proprietorship), a firm will have agency costs.
⊚ true
⊚ false
