Fundamentals of Corporate Finance, 5th Edition by Robert , David , Bates & Gillan. (All Chapters 1-21) | TEST BANK

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1

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,Chapter 1 ss The Financial Manager and the Firm
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1) The financial manager is responsible for making decisions that are in the best interests of
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the firm's owners.
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Answer: TRUE gh s s gh ss



Diff: 1
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LearningObjective: LO 1 s s s ss



Bloomcode: Knowledge
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AACSB: ss



Analytic
IMA: FSA
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AICPA: Process and Resource Management Perspectives ss ss ss ss




2) A patent is a productive asset for a technology-based
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firm. Answer: TRUE
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Diff: 1 ss



LearningObjective: LO 1 s s s ss



Bloomcode: Knowledge
ss s s



AACSB: ss



Analytic
IMA: Business Economics ss



AICPA: Global and Industry Perspectives ss ss ss




3) Intangible assets generate most of amanufacturing firm's cash flows.
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Answer:
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FALSE Diff: 2
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LearningObjective: LO 1 s s s ss



Bloomcode: Application
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AACSB: ss



Analytic
IMA: Corporate Finance ss



AICPA: Process and Resource Management Perspectives ss ss ss ss




4) The most fundamental way a business can grow in size is byreinvesting cash flows or earnings.
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Answer:
gh TRUE gh s s gh s s



Diff: 1 ss



LearningObjective: LO 1 s s s ss



Bloomcode: Knowledge
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AACSB: ss



Analytic
IMA: FSA
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AICPA: Process and Resource Management Perspectives ss ss ss ss




3

, 5) A firm that goes bankrupt will always be
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liquidated. Answer:
ss FALSE s s gh s s g ssh ss



Diff: 2 ss



LearningObjective: LO 1 s s s ss



Bloomcode: Application
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AACSB:
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Analytic
IMA: Corporate Finance AICPA:
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ResourceManagement

6) Capital assets are generally short term in
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nature. Answer:
ss FALSE ssgh gh s s g ssh ss



Diff: 1 ss



LearningObjective: LO 1 s s s ss



Bloomcode: Knowledge
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AACSB:
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Analytic
IMA: Corporate Finance ss



AICPA: Process and Resource Management Perspectives ss ss ss ss




7) A good capital budgeting or investment decision is one in which the benefits are worth moreto
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the firm than the cost of the project.
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Answer: TRUE gh s s gh s s gh



Explanation: Regardless of the project, a good investment is one in which the benefits are ss ss ss ss ss ss ss ss ss ss ss ss ss



worth more to the firm than the costs of the asset.
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Diff: 2 ss



LearningObjective: LO 1 s s s ss



Bloomcode: Analysis AACSB:
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Analytic
IMA: Budget Preparation
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AICPA: Resource Management
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8) Investment decisions determine how firms raise capital to pay for their investments.
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Answer:
ss FALSE gh s s g ssh ss



Diff: 1 ss



Learning Objective: LO 1 ss s s ss



Bloomcode: Knowledge
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AACSB:
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Analytic
IMA: Investment Decisions AICPA:
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Strategic/Critical Thinking gh




9) Net working capital is the dollar difference between a firm's total current assets and
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total liabilities.
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Answer: FALSE Diff: gh s s g ssh s s s s



1
Learning Objective: LO 1 ss s s ss



Bloomcode: Knowledge
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AACSB:
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Analytic
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