test-bank-for-foundations-of-finance-10th-edition-by-arthur-j.-keown.-isbn-no0134897269-all-c-hapters

TEST BANK
Foundations of Finance, 10e (Keown/Martin/Petty)

,Chapter 1 An Introduction to the Foundations of Financial Management


Learning Objective 1.1


1) Financial management deals with the maintenance and creation of economic value or wealth.
Answer: TRUE
Diff: 1 Page Ref: 3
Keywords: Financial Management
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the
corporation's stock price.
Answer: FALSE
Diff: 1 Page Ref: 4
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's
shareholders.
Answer: FALSE
Diff: 1 Page Ref: 3
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


4) Shareholder wealth maximization means maximizing the price of the existing common stock.
Answer: TRUE
Diff: 1 Page Ref: 3

angelinas
Keywords: Shareholder Wealth, Goal of the Firm
Learning Obj.: L.O. 1.1

https://www.stuvia.com/user/angelinas

,AACSB: Reflective Thinking


5) It is important to evaluate a corporate manager's financial decision by measuring the effect the decision
should have on the corporation's stock price if everything else were held constant.
Answer: TRUE
Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Maximize Shareholder Wealth
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking




angelinas
6) Corporate managers should accept investment projects that maximize profits in the short run because
of the time value of money.
Answer: FALSE
Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Profits, Time Value of Money

https://www.stuvia.com/user/angelinas

, Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


7) The goal of the firm's financial managers should be the maximization of the total value of the firm's
stock.
Answer: TRUE
Diff: 1 Page Ref: 3
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


8) The payment of a dividend to current shareholders will have no impact on a corporation's share price
because the cash paid is not available to future potential shareholders who may want to buy the
corporation's stock.
Answer: FALSE
Diff: 1 Page Ref: 4
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


9) One problem with maximization of shareholder wealth as a goal is that it ignores risk taken by the
firm's financial decisions.
Answer: FALSE
Diff: 1 Page Ref: 4
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


angelinas
10) The goal of profit maximization ignores the risk of financial decisions.
Answer: FALSE
Diff: 1 Page Ref: 4
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


https://www.stuvia.com/user/angelinas