Boost Your Grades with the [Fundamentals of Corporate Finance,Parrino,2e] Test Bank

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
1. The financial manager is responsible for making decisions that are in the best
interest of the firm's owners.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
2. The demand for a potential business product, as well as the identification of
what product or services is to be produced, are both contained in a business
plan.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
3. The local Republican Party is a stakeholder in a local firm that makes no
political donations to either party.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
4. A patent is a productive asset for a technology-based firm.
A) True
B) False
Ans: A

, Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium

5. Intangible assets generate most of a manufacturing firm's cash flows.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
6. The most fundamental way that a business can grow in size is from the
reinvestment of cash flows or earnings.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
7. When bankruptcy occurs, the firm will always be liquidated.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
8. Capital assets are generally short term in nature.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 1

, Level of Difficulty: Medium
9. A good capital budgeting decision is one in which the benefits are worth more
to the firm than the cost of the asset.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
10. The financing decision determines how firms raise cash to pay for their
investments.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy

11. The dollar difference between current assets and total liabilities is called
working capital.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
12. A sole proprietorship is an owner's only business.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 2

, Level of Difficulty: Medium
13. The greatest number of businesses in the United States are corporations.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
14. Unlimited liability means that the owner of a firm is responsible for paying all
the firm's bills.
A) True
B) False
Ans: A


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
15. The process of transferring ownership of a sole proprietorship is relatively easy.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
16. General partners in a business have limited liability with regard to their firm's
obligations.
A) True
B) False
Ans: B


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium