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Chapter 1 An Introduction to the Foundations of Financial Management
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Learning Objective 1.1 st st
1) Financial management deals with the maintenance and creation of economic value or wealth. A
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nswer: TRUE s t
Diff: 1 st Page Ref: 3 st st
Keywords: Financial Management Learnin st st st
g Obj.: L.O. 1.1
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AACSB: Reflective Thinking s t st
2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the cor
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poration's stock price. st st
Answer: FALSE Dif st st
f: 1 st Page Ref: 4 st st
Keywords: Goal of the Firm L st st st st st
earning Obj.: L.O. 1.1 AACS st st st st
B: Reflective Thinking
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3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's sh
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areholders.
Answer: FALSE Dif st st
f: 1 st Page Ref: 3 st st
Keywords: Goal of the Firm L st st st st st
earning Obj.: L.O. 1.1 AACS st st st st
B: Reflective Thinking
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4) Shareholder wealth maximization means maximizing the price of the existing common stock. A
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nswer: TRUE s t
Diff: 1 st Page Ref: 3 st st
st angelinas
, Keywords: Shareholder Wealth, Goal of the Firm Lear
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ning Obj.: L.O. 1.1
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AACSB: Reflective Thinking s t st
5) It is important to evaluate a corporate manager's financial decision by measuring the effect the decision
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should have on the corporation's stock price if everything else were held constant. Answ
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er: TRUE
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Diff: 2 st Page Ref: 4 st st
Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning
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t Obj.: L.O. 1.1 st st
AACSB: Reflective Thinking s t st
st angelinas
,Foundations of Finance, 10e (Keown/Martin/Petty) st st st st
Chapter 1 An Introduction to the Foundations of Financial Management
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Learning Objective 1.1 st st
1) Financial management deals with the maintenance and creation of economic value or wealth. A
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nswer: TRUE s t
Diff: 1 st Page Ref: 3 st st
Keywords: Financial Management Learnin st st st
g Obj.: L.O. 1.1
st st st
AACSB: Reflective Thinking s t st
2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the cor
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poration's stock price. st st
Answer: FALSE Dif st st
f: 1 st Page Ref: 4 st st
Keywords: Goal of the Firm L st st st st st
earning Obj.: L.O. 1.1 AACS st st st st
B: Reflective Thinking
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3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's sh
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areholders.
Answer: FALSE Dif st st
f: 1 st Page Ref: 3 st st
Keywords: Goal of the Firm L st st st st st
earning Obj.: L.O. 1.1 AACS st st st st
B: Reflective Thinking
s t st
4) Shareholder wealth maximization means maximizing the price of the existing common stock. A
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nswer: TRUE s t
Diff: 1 st Page Ref: 3 st st
st angelinas
, Keywords: Shareholder Wealth, Goal of the Firm Lear
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ning Obj.: L.O. 1.1
st st st
AACSB: Reflective Thinking s t st
5) It is important to evaluate a corporate manager's financial decision by measuring the effect the decision
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should have on the corporation's stock price if everything else were held constant. Answ
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er: TRUE
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Diff: 2 st Page Ref: 4 st st
Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning
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t Obj.: L.O. 1.1 st st
AACSB: Reflective Thinking s t st
st angelinas
