Foundations of Financial Management, 17e (Block)
Chapter 1 The Goals and Activities of Financial Management
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
R
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
SE
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
D
investments.
Answer: FALSE
O
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
C
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
S
4) Real capital is composed of long-term plant and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
1
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
R
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
SE
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) Recently, the emphasis of financial management has been on the relationship between risk and
D
return.
Answer: TRUE
O
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
C
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
S
8) The first Nobel Prizes given to finance professors were for their contributions to capital
structure theory and portfolio theories of risk and return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
2
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) How investors handle risk is an important topic that usually only economists observe.
Answer: FALSE
Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on.
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
10) Mortgage-backed securities were devalued by accounting standards because of the high credit
ratings (AAA).
R
Answer: FALSE
Explanation: These securities were devalued because borrowers defaulted on their loans and
didn't have the financial means to back up their loans in other ways.
SE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
D
Accessibility: Keyboard Navigation
11) "Credit default swaps" are one of several tools that Congress and the President of the United
O
States have jointly developed to ease the financial crisis that began in 2008.
Answer: FALSE
Difficulty: 1 Easy
C
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
S
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, 12) The Dodd-Frank Act was created by Congress along with its goals and regulatory
responsibility, but it is facilitated by various agencies.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
N
13) The Dodd-Frank Act contains the Volcker Rule, which encourages financial institutions to
allow for more speculative investments for average investors.
U
Answer: FALSE
Difficulty: 2 Medium
R
Topic: Ethics, governance, and regulation
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
SE
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) The Dodd-Frank Act's oversight allowing regulation of banking fees and available products
has been considered as not being in the best interests of a free market.
D
Answer: TRUE
Difficulty: 2 Medium
Topic: Ethics, governance, and regulation
O
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
AACSB: Analytical Thinking
C
Accessibility: Keyboard Navigation
15) The Internet impacts e-commerce by creating a mechanism for improved communications
S
between a business, its customers, and its suppliers.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 1 The Goals and Activities of Financial Management
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
R
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
SE
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3) Financial capital is composed of long-term plant and equipment, as well as other tangible
D
investments.
Answer: FALSE
O
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
C
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
S
4) Real capital is composed of long-term plant and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
1
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
R
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
SE
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) Recently, the emphasis of financial management has been on the relationship between risk and
D
return.
Answer: TRUE
O
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
C
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
S
8) The first Nobel Prizes given to finance professors were for their contributions to capital
structure theory and portfolio theories of risk and return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
2
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) How investors handle risk is an important topic that usually only economists observe.
Answer: FALSE
Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on.
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
N
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
U
10) Mortgage-backed securities were devalued by accounting standards because of the high credit
ratings (AAA).
R
Answer: FALSE
Explanation: These securities were devalued because borrowers defaulted on their loans and
didn't have the financial means to back up their loans in other ways.
SE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
D
Accessibility: Keyboard Navigation
11) "Credit default swaps" are one of several tools that Congress and the President of the United
O
States have jointly developed to ease the financial crisis that began in 2008.
Answer: FALSE
Difficulty: 1 Easy
C
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
S
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, 12) The Dodd-Frank Act was created by Congress along with its goals and regulatory
responsibility, but it is facilitated by various agencies.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
N
13) The Dodd-Frank Act contains the Volcker Rule, which encourages financial institutions to
allow for more speculative investments for average investors.
U
Answer: FALSE
Difficulty: 2 Medium
R
Topic: Ethics, governance, and regulation
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
SE
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) The Dodd-Frank Act's oversight allowing regulation of banking fees and available products
has been considered as not being in the best interests of a free market.
D
Answer: TRUE
Difficulty: 2 Medium
Topic: Ethics, governance, and regulation
O
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
AACSB: Analytical Thinking
C
Accessibility: Keyboard Navigation
15) The Internet impacts e-commerce by creating a mechanism for improved communications
S
between a business, its customers, and its suppliers.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
