Test Bank - Foundations of Finance: The Logic and Practice of Financial Management 10th Edition ( Keown, 2019) All Chapters

, FoundationsofFinance,10e(Keown/Martin/Petty) Latest k k




&Updated A+ k k




Chapter 1 An Introduction to the Foundations of Financial Management
k k k k k k k k




Learning Objective 1.1 k k




1) Financial management deals with the maintenance and creation of economic value or
k k k k k k k k k k k




k wealth. Answer: TRUE
k k




Diff: 1 Page Ref: 3
k k k k




Keywords: Financial Management Learning Obj.: L.O. 1.1
k k k k k k




k AACSB: Reflective Thinking
k k




2) Each financial decision made by a corporate manager can be evaluated by its direct
k k k k k k k k k k k k k




k impact on the corporation's stock price.
k k k k k




Answer: FALSE Diff: 1k k k Page Ref: 4 k k




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
k k k k k k k k k k k




3) The fundamental goal of a business is to maximize the retained earnings available to the
k k k k k k k k k k k k k k




k corporation's shareholders. k




Answer: FALSE Diff: 1k k k Page Ref: 3 k k




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
k k k k k k k k k k k

,4) Shareholder wealth maximization means maximizing the price of the existing common
k k k k k k k k k k




k stock. Answer: TRUE
k k




Diff: 1 Page Ref: 3
k k k k




Keywords: Shareholder Wealth, Goal of the Firm Learning Obj.: L.O. 1.1 AACSB:
k k k k k k k k k k k




k Reflective Thinking k




5) It is important to evaluate a corporate manager's financial decision by measuring the
k k k k k k k k k k k k




k effect the decision
k k




should have on the corporation's stock price if everything else were held constant. Answer:
k k k k k k k k k k k k k




k TRUE

Diff: 2 Page Ref: 4
k k k k




Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning Obj.: L.O. 1.1 AACSB:
k k k k k k k k k k k k




k Reflective Thinking k




6) Corporate managers should accept investment projects that maximize profits in the short
k k k k k k k k k k k




k run because of the time value of money.
k k k k k k k




Answer: FALSE Diff: 2 k k k Page Ref: 4 k k




Keywords: Goal of the Firm, Profits, Time Value of Money Learning Obj.: L.O. 1.1 AACSB:
k k k k k k k k k k k k k k




k Reflective Thinking k

, 7) The goal of the firm's financial managers should be the maximization of the total value of
k k k k k k k k k k k k k k k




k the firm's stock.
k k




Answer: TRUE Diff: 1 k k k Page Ref: 3 k k




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
k k k k k k k k k k k




8) The payment of a dividend to current shareholders will have no impact on a corporation's
k k k k k k k k k k k k k k




k share price because the cash paid is not available to future potential shareholders who may
k k k k k k k k k k k k k k




k want to buy the corporation's stock.
k k k k k




Answer: FALSE Diff: 1 k k k Page Ref: 4 k k




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
k k k k k k k k k k k




9) One problem with maximization of shareholder wealth as a goal is that it ignores risk
k k k k k k k k k k k k k k




k taken by the firm's financial decisions.
k k k k k




Answer: FALSE Diff: 1 k k k Page Ref: 4 k k




Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
k k k k k k k k k k k




10) The goal of profit maximization ignores the risk of financial decisions. Answer: FALSE
k k k k k k k k k k k k




Diff: 1 Page Ref: 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective
k k k k k k k k k k k k k k k




k Thinking