Test Bank For Foundations of Finance 10th Edition, Arthur J. Keown, John D. Martin, J. William Petty – Complete Question and Answer Collection

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
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
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