TESTBANK b
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FoundationsofFinance,10e(Keown/Martin/Petty)
Chapter1 AnIntroductiontotheFoundationsofFinancialManagement
b b b
LearningObjective1.1
b
1) Financialmanagementdealswiththemaintenanceandcreationofeconomicvalueorwealth.
b
Answer: TRUE
Diff:1 PageRef:3
Keywords:FinancialManagement
LearningObj.:L.O.1.1
AACSB: ReflectiveThinkingb
2) Eachfinancialdecisionmadebyacorporatemanagercanbeevaluatedbyitsdirectimpactonthe
b b b
corporation's stock price.
b b
Answer:FALSE
Diff:1 PageRef:4
Keywords:GoaloftheFirm
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
3) Thefundamentalgoalofabusinessistomaximizetheretainedearningsavailabletothecorporation's
b b
shareholders.
Answer:FALSE
Diff:1 PageRef:3
Keywords:GoaloftheFirm
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
4) Shareholderwealthmaximizationmeansmaximizingthepriceoftheexistingcommonstock.
b b b b b
Answer: TRUE
Diff:1 PageRef:3
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Keywords:ShareholderWealth,GoaloftheFirm
b
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
b
5) Itisimportanttoevaluateacorporatemanager'sfinancialdecisionbymeasuringtheeffectthedecision
b b b
shouldhaveonthecorporation'sstockpriceifeverythingelsewereheldconstant.Answer:
b
TRUE
Diff:2 PageRef:4
Keywords:GoaloftheFirm,MaximizeShareholderWealth Learning
b b
Obj.:L.O.1.1
AACSB: ReflectiveThinking
b
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6) Corporatemanagersshouldacceptinvestmentprojectsthatmaximizeprofitsintheshortrunbecauseofthe
b b b b b b b
timevalueofmoney.
Answer:FALSE
Diff:2 PageRef:4
Keywords:GoaloftheFirm,Profits,TimeValueofMoneyLearning
b
Obj.:L.O.1.1
AACSB: ReflectiveThinking
7) Thegoalofthefirm'sfinancialmanagersshouldbethemaximizationofthetotalvalueofthefirm'sstock.
b b b b
Answer: TRUE
Diff:1 PageRef:3
Keywords:GoaloftheFirm
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
8) Thepaymentofadividendtocurrentshareholderswillhavenoimpactonacorporation'ssharepricebecause
b b b b b
thecashpaidisnotavailabletofuturepotentialshareholderswhomaywanttobuythecorporation'sstock.
Answer:FALSE
Diff:1 PageRef:4
Keywords:GoaloftheFirm
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
9) Oneproblemwithmaximizationofshareholderwealthasagoalisthat itignoresrisktakenbythefirm's
b b b b b
financialdecisions.
Answer:FALSE
Diff:1 PageRef:4
Keywords:GoaloftheFirm
LearningObj.:L.O.1.1
AACSB: ReflectiveThinking
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