TEST BANK FOR Fundamentals of Corporate Finance 5th Edition by Robert Parrino, Thomas W. Bates, Stuart L. Gillan & David S. Kidwell All Chapters 1-21 |ISBN: 9781119795438| Guide A+

TEST BANK
Test Bank for Fundamentals of Corporate Finance

Parrino; Bates; Gillan; Kidwell
5th Edition
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,Chapter 1-21
Chapter 1 The Financial Manager and the Firm

1) The financial manager is responsible for making decisions that are in the best interests of the
firm's owners.
Answer: TRUE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: FSA
AICPA: Process and Resource Management Perspectives

2) A patent is a productive asset for a technology-based firm.
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Answer: TRUE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: Business Economics
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AICPA: Global and Industry Perspectives

3) Intangible assets generate most of a manufacturing firm's cash flows.
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Answer: FALSE
Diff: 2
Learning Objective: LO 1
Bloomcode: Application
AACSB: Analytic
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IMA: Corporate Finance
AICPA: Process and Resource Management Perspectives
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4) The most fundamental way a business can grow in size is by reinvesting cash flows or earnings.
Answer: TRUE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: FSA
AICPA: Process and Resource Management Perspectives

,5) A firm that goes bankrupt will always be liquidated.
Answer: FALSE
Diff: 2
Learning Objective: LO 1
Bloomcode: Application
AACSB: Analytic
IMA: Corporate Finance
AICPA: Resource Management

6) Capital assets are generally short term in nature.
Answer: FALSE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
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IMA: Corporate Finance
AICPA: Process and Resource Management Perspectives

7) A good capital budgeting or investment decision is one in which the benefits are worth more to
the firm than the cost of the project.
Answer: TRUE
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Explanation: Regardless of the project, a good investment is one in which the benefits are worth
more to the firm than the costs of the asset.
Diff: 2
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Learning Objective: LO 1
Bloomcode: Analysis
AACSB: Analytic
IMA: Budget Preparation
AICPA: Resource Management
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8) Investment decisions determine how firms raise capital to pay for their investments.
Answer: FALSE
Diff: 1
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Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: Investment Decisions
AICPA: Strategic/Critical Thinking

9) Net working capital is the dollar difference between a firm's total current assets and total
liabilities.
Answer: FALSE
Diff: 1
Learning Objective: LO 1
Bloomcode: Knowledge
AACSB: Analytic
IMA: Budget Preparation
AICPA: Process and Resource Management Perspectives

, 10) A sole proprietorship is a business where ownership interest can be transferred to someone
else.
Answer: FALSE
Diff: 1
Learning Objective: LO 2
Bloomcode: Knowledge
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives

11) One of the disadvantages of a general partnership is the double taxation of profits.
Answer: FALSE
Diff: 1
Learning Objective: LO 2
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Bloomcode: Comprehension
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives

12) Unlimited liability means that the owner of a firm is responsible for paying all the bills of the
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firm in the event of a bankruptcy.
Answer: TRUE
Diff: 2
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Learning Objective: LO 2
Bloomcode: Application
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives
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13) The process of transferring ownership of a sole proprietorship is relatively easy compared to a
public corporation.
Answer: FALSE
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Diff: 1
Learning Objective: LO 2
Bloomcode: Comprehension
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives

14) General partners in a business have limited liability with regard to money owed to creditors.
Answer: FALSE
Diff: 1
Learning Objective: LO 2
Bloomcode: Comprehension
AACSB: Analytic
IMA: Business Economics
AICPA: Global and Industry Perspectives