Test Bank for Foundations of Finance 10th Edition by Arthur J. Keown, John D. Martin; J. William Petty

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TEST BANK FOR FOUNDATIONS OF
FINANCE, 10TH EDITION BY
KEOWN/MARTIN AND PETTY

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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



2

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4) Shareholder wealth maximization means maximizing the price of the

existing common stock. Answer: TRUE

Diff: 1 Page Ref: 3


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3

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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




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