Test-bank-for-foundations-of-finance-10th-edition-by-arthur-j.-keown

TESTBANK
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,FoundationsofFinance,10e(Keown/Martin/Petty) b b b b




Chapter1 An Introduction to theFoundationsofFinancialManagement
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LearningObjective1.1 b b




1) Financial management deals withthe maintenanceandcreation of economic valueor wealth.
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bAnswer: TRUE b




Diff: 1 b Page Ref:3 b b




Keywords:FinancialManagement b b




bLearning Obj.: L.O. 1.1 b b b




AACSB: ReflectiveThinking b b




2) Eachfinancial decisionmade byacorporatemanagercan beevaluated byitsdirect impacton the
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corporation's stock price.
b b b




Answer: FALSE b




bDiff: 1 b PageRef:4 b b




Keywords: Goal of the Firm b b b b




bLearning Obj.: L.O. 1.1 b b b




bAACSB: ReflectiveThinking b b




3) Thefundamental goal ofabusinessisto maximize theretained earnings availableto the corporation's
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shareholders.
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Answer: FALSE b




bDiff: 1 b PageRef:3 b b




Keywords: Goal of the Firm b b b b




bLearning Obj.: L.O. 1.1 b b b




bAACSB: ReflectiveThinking b b




4) Shareholder wealth maximization means maximizingthe priceoftheexistingcommon stock.
b b b b b b b b b b b




bAnswer: TRUE b




Diff: 1 b Page Ref:3 b b




b angelinas

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,Keywords: ShareholderWealth,GoaloftheFirmb b b b b b




bLearning Obj.: L.O. 1.1 b b b




AACSB: ReflectiveThinking b b




5) Itisimportanttoevaluateacorporatemanager'sfinancial decisionbymeasuringtheeffectthedecision
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should have onthe corporation's stockpriceifeverythingelse were held constant. Answer:
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b TRUE
Diff: 2 b Page Ref:4 b b




Keywords: Goal oftheFirm,MaximizeShareholderWealth Learning
b b b b b b b b




bObj.: L.O. 1.1 b b




AACSB: ReflectiveThinking b b




b angelinas




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

, 6) Corporatemanagers shouldacceptinvestment projectsthat maximize profitsin theshort run because of the
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time value of money.
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Answer: FALSE b




bDiff: 2 b PageRef:4 b b




Keywords: Goal ofthe Firm, Profits,Time Value ofMoney Learning
b b b b b b b b b b




bObj.: L.O. 1.1 b b




AACSB: ReflectiveThinking b b




7) Thegoal ofthe firm's financial managers should be themaximization of the total valueofthefirm's stock.
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Answer: TRUE b




bDiff: 1 b PageRef:3 b b




Keywords: Goal of the Firm b b b b




bLearning Obj.: L.O. 1.1 b b b




bAACSB: ReflectiveThinking b b




8) Thepayment of a dividendto currentshareholders willhave no impact ona corporation's share price because
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the cash paid is not available to future potential shareholders who may want to buy the corporation's stock.
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Answer: FALSE b




bDiff: 1 b PageRef:4 b b




Keywords: Goal of the Firm b b b b




bLearning Obj.: L.O. 1.1 b b b




bAACSB: ReflectiveThinking b b




9) One problemwith maximization of shareholder wealthas a goal is that it ignores risk taken by the firm's
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financial decisions.
b b




Answer: FALSE b




bDiff: 1 b PageRef:4 b b




Keywords: Goal of the Firm b b b b




bLearning Obj.: L.O. 1.1 b b b




bAACSB: ReflectiveThinking b b




b angelinas




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