Financial Management: Principles and Applications, 11e (Titman)
Chapter 1 Getting Started-Principles of Finance
1.1 Finance: An Overview
1) Which of the following statements best represents what finance is about?
A) How political, social, and economic forces affect corporations
B) Maximizing profits
C) Creation and maintenance of economic wealth
D) Reducing risk
Answer: C
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: what is finance?
Principles: Principle 3: Cash Flows Are the Source of Value
2) The goal of the firm should be:
A) maximization of profits.
B) maximization of shareholder wealth.
C) maximization of consumer satisfaction.
D) maximization of sales.
Answer: B
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: shareholder
,Principles: Principle 3: Cash Flows Are the Source of Value
3) Which of the following factors enable a public corporation to grow to a greater extent,
and perhaps at a faster rate, than a partnership or a proprietorship?
A) Unlimited liability of shareholders
B) Access to the capital markets
C) Limited life
D) Elimination of double taxation on corporate income
E) All of the above
Answer: B
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: corporation
,4) Which of the following reasons is most responsible for corporations being the most
important form of business organization in the United States?
A) Corporations have limited life.
B) Stockholders have unlimited liability.
C) Corporations are subject to less government regulation than the other forms of
business organization.
D) Corporations have the ability to raise larger sums of capital than the other forms of
business organization.
E) Corporations are subjected to less taxation than the other forms of business
organization.
Answer: D
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: corporation
5) Difficulty in finding profitable projects is due to:
A) social responsibility.
B) competitive markets.
C) ethical dilemmas.
D) opportunity costs.
Answer: B
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: competitive markets
Principles: Principle 2: There Is a Risk-Return Tradeoff
6) Which of the following is NOT a principle of basic financial management?
, A) Risk/return tradeoff
B) Incremental cash flow counts
C) Efficient capital markets
D) Profit is king
Answer: D
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: basic financial management principles
7) The corporation is the most effective form of organization in terms of raising capital.
Answer: TRUE
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: corporation
8) Ethical dilemmas frequently exist in finance.
Answer: TRUE
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: what is finance?
Chapter 1 Getting Started-Principles of Finance
1.1 Finance: An Overview
1) Which of the following statements best represents what finance is about?
A) How political, social, and economic forces affect corporations
B) Maximizing profits
C) Creation and maintenance of economic wealth
D) Reducing risk
Answer: C
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: what is finance?
Principles: Principle 3: Cash Flows Are the Source of Value
2) The goal of the firm should be:
A) maximization of profits.
B) maximization of shareholder wealth.
C) maximization of consumer satisfaction.
D) maximization of sales.
Answer: B
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: shareholder
,Principles: Principle 3: Cash Flows Are the Source of Value
3) Which of the following factors enable a public corporation to grow to a greater extent,
and perhaps at a faster rate, than a partnership or a proprietorship?
A) Unlimited liability of shareholders
B) Access to the capital markets
C) Limited life
D) Elimination of double taxation on corporate income
E) All of the above
Answer: B
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: corporation
,4) Which of the following reasons is most responsible for corporations being the most
important form of business organization in the United States?
A) Corporations have limited life.
B) Stockholders have unlimited liability.
C) Corporations are subject to less government regulation than the other forms of
business organization.
D) Corporations have the ability to raise larger sums of capital than the other forms of
business organization.
E) Corporations are subjected to less taxation than the other forms of business
organization.
Answer: D
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: corporation
5) Difficulty in finding profitable projects is due to:
A) social responsibility.
B) competitive markets.
C) ethical dilemmas.
D) opportunity costs.
Answer: B
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: competitive markets
Principles: Principle 2: There Is a Risk-Return Tradeoff
6) Which of the following is NOT a principle of basic financial management?
, A) Risk/return tradeoff
B) Incremental cash flow counts
C) Efficient capital markets
D) Profit is king
Answer: D
Diff: 2
Topic: 1.1 Finance: An Overview
Keywords: basic financial management principles
7) The corporation is the most effective form of organization in terms of raising capital.
Answer: TRUE
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: corporation
8) Ethical dilemmas frequently exist in finance.
Answer: TRUE
Diff: 1
Topic: 1.1 Finance: An Overview
Keywords: what is finance?
