Complete Test Bank for :
b b b b
Fundamentals Of Corporate Finance 5th Edition
b b b b b
By Robert Parrino, David S. Kidwell, Thomas
b b b b b b b
Bates & Stuart L. Gillan – Complete Questions &
b b b b b b b b b
Answers Study Guide
b b b
1
,Chapter 1 b The Financial Manager and the Firm
b b b b b
1) The financial manager is responsible for making decisions that are in the best interests of the firm's
b b b b b b b b b b b b b b b b
owners.
b
Answer: TRUE b
Diff: 1
b b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: FSA b b
AICPA: Process and Resource Management Perspectives
b b b b b b
2) A patent is a productive asset for a technology-based firm.
b b b b b b b b b
Answer: TRUE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives
b b b b b
3) Intangible assets generate most of a manufacturing firm's cash flows.
b b b b b b b b b
Answer: FALSE
b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Corporate Finance
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
4) Themostfundamental way a business can grow insizeis by reinvesting cash flows or earnings.
b b b b b b b b b b b b b b b b
Answer: TRUE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: FSA b b
AICPA: Process and Resource Management Perspectives
b b b b b b
2
,5) A firm that goes bankrupt will always be liquidated.
b b b b b b b b
Answer: FALSE
b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Corporate Finance b b
AICPA: ResourceManagement
b b b
6) Capital assets are generally shortterm in nature.b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Corporate Finance
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
7) A good capital budgeting or investment decision is one in which the benefits are worth more to the
b b b b b b b b b b b b b b b b b
firm than the cost of the project.
b b b b b b b
Answer: TRUE b b
Explanation: Regardless of the project, a good investment is one in which the benefits are worth more to
b b b b b b b b b b b b b b b b b
the firm than the costs of the asset.
b b b b b b b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Analysis
b b
AACSB: Analytic
b b
IMA: Budget Preparation b b
AICPA: ResourceManagement
b b b
8) Investment decisions determine how firms raise capital to pay for their investments.
b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Investment Decisions
b b
AICPA: Strategic/Critical Thinking
b b b
9) Net working capital is the dollar difference between a firm's total current assets and total
b b b b b b b b b b b b b b
liabilities.
b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Budget Preparation
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
3
, 10) A sole proprietorship is a business where ownership interest can be transferred to someone else.
b b b b b b b b b b b b b b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 2 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
11) One of the disadvantages of a general partnership is the double taxation of profits.
b b b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
12) Unlimited liability means that the owner of a firm is responsible for paying all the bills of the firm
b b b b b b b b b b b b b b b b b b
in the event of a bankruptcy.
b b b b b b
Answer: TRUE b
Diff: 2
b b
Learning Objective: LO 2 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
13) The process of transferring ownership of a sole proprietorship isrelatively easy compared to a
b b b b b b b b b b b b b b
public corporation.
b b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
14) General partners in a business have limited liability with regard to money owed to creditors.
b b b b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
4
b b b b
Fundamentals Of Corporate Finance 5th Edition
b b b b b
By Robert Parrino, David S. Kidwell, Thomas
b b b b b b b
Bates & Stuart L. Gillan – Complete Questions &
b b b b b b b b b
Answers Study Guide
b b b
1
,Chapter 1 b The Financial Manager and the Firm
b b b b b
1) The financial manager is responsible for making decisions that are in the best interests of the firm's
b b b b b b b b b b b b b b b b
owners.
b
Answer: TRUE b
Diff: 1
b b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: FSA b b
AICPA: Process and Resource Management Perspectives
b b b b b b
2) A patent is a productive asset for a technology-based firm.
b b b b b b b b b
Answer: TRUE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives
b b b b b
3) Intangible assets generate most of a manufacturing firm's cash flows.
b b b b b b b b b
Answer: FALSE
b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Corporate Finance
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
4) Themostfundamental way a business can grow insizeis by reinvesting cash flows or earnings.
b b b b b b b b b b b b b b b b
Answer: TRUE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: FSA b b
AICPA: Process and Resource Management Perspectives
b b b b b b
2
,5) A firm that goes bankrupt will always be liquidated.
b b b b b b b b
Answer: FALSE
b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Corporate Finance b b
AICPA: ResourceManagement
b b b
6) Capital assets are generally shortterm in nature.b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Corporate Finance
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
7) A good capital budgeting or investment decision is one in which the benefits are worth more to the
b b b b b b b b b b b b b b b b b
firm than the cost of the project.
b b b b b b b
Answer: TRUE b b
Explanation: Regardless of the project, a good investment is one in which the benefits are worth more to
b b b b b b b b b b b b b b b b b
the firm than the costs of the asset.
b b b b b b b b
Diff: 2 b
Learning Objective: LO 1 b b b
Bloomcode: Analysis
b b
AACSB: Analytic
b b
IMA: Budget Preparation b b
AICPA: ResourceManagement
b b b
8) Investment decisions determine how firms raise capital to pay for their investments.
b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Investment Decisions
b b
AICPA: Strategic/Critical Thinking
b b b
9) Net working capital is the dollar difference between a firm's total current assets and total
b b b b b b b b b b b b b b
liabilities.
b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 1 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Budget Preparation
b b b
AICPA: Process and Resource Management Perspectives
b b b b b b
3
, 10) A sole proprietorship is a business where ownership interest can be transferred to someone else.
b b b b b b b b b b b b b b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 2 b b b
Bloomcode: Knowledge
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
11) One of the disadvantages of a general partnership is the double taxation of profits.
b b b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
12) Unlimited liability means that the owner of a firm is responsible for paying all the bills of the firm
b b b b b b b b b b b b b b b b b b
in the event of a bankruptcy.
b b b b b b
Answer: TRUE b
Diff: 2
b b
Learning Objective: LO 2 b b b
Bloomcode: Application
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
13) The process of transferring ownership of a sole proprietorship isrelatively easy compared to a
b b b b b b b b b b b b b b
public corporation.
b b
Answer: FALSE b
Diff: 1
b b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
14) General partners in a business have limited liability with regard to money owed to creditors.
b b b b b b b b b b b b b b
Answer: FALSE
b b
Diff: 1 b
Learning Objective: LO 2 b b b
Bloomcode: Comprehension
b b
AACSB: Analytic
b b
IMA: Business Economics
b b b
AICPA: Global and Industry Perspectives b b b b b
4
