Te
ch
Test Bank Fundamentals Of Corporate
Gu
Finance, 11th Edition by Thomas Holloway
ru
Stephen A. Ross, Randolph W. Westerfield
All Chapters 1-26 All Answers are at the End of Each Chapter
1|Page
, Te
ch
Chapter 1: Introduction to Corporate Finance
Gu
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The size, timing and risk of cash flows are important when evaluating a capital budgeting decision.
ru
true
false
2) A capital expenditure project becomes desirable when the project is worth more to the firm than the
cost to acquire it.
true
false
3) A capital expenditure project becomes desirable when the present value of the cash flow generated by
the project exceeds the project's present value of cost.
true
false
4) Optimal capital structure determines the least expensive sources of funds for the firm to borrow.
true
false
5) Optimal capital structure determines how much debt the firm should have in relation to its level of
equity.
true
false
6) Capital structure determines the level of current assets that is required to maintain the firm's operations.
true
false
7) Capital structure determines how much risk is associated with the future cash flows of a project.
true
2|Page
, Te
ch
false
Gu
8) Determining when a supplier should be paid is a capital structure decision.
ru
true
false
9) Establishing the accounts receivable policies is a capital structure decision.
true
false
10) Determining the amount of money to borrow to finance a 10-year project is a capital structure
decision.
true
false
11) Deciding if a new project should be accepted is a working capital decision.
true
false
12) When evaluating a project in which a firm might invest, the size but not the timing of the cash flows
is important.
true
false
13) Working capital management addresses the firm's appropriate level of inventory.
true
false
14) Common stockholders or limited partners can lose, at most, what they have invested in a firm.
true
3|Page
, Te
ch
false
Gu
15) Partnership income is treated as personal income of the partners.
ru
true
false
16) A limited partner can lose his or her investment in the partnership.
true
false
17) Maximization of the current earnings of the firm is the main goal of the financial manager.
true
false
18) The primary goal of a financial manager should be to maximize the value of shares issued to new
investors in the corporation.
true
false
19) The primary goal of financial management is to minimize the corporate tax liability.
true
false
20) Control of the firm ultimately rests with board of directors. They elect the management, who, in turn,
lead the company.
true
false
4|Page
ch
Test Bank Fundamentals Of Corporate
Gu
Finance, 11th Edition by Thomas Holloway
ru
Stephen A. Ross, Randolph W. Westerfield
All Chapters 1-26 All Answers are at the End of Each Chapter
1|Page
, Te
ch
Chapter 1: Introduction to Corporate Finance
Gu
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The size, timing and risk of cash flows are important when evaluating a capital budgeting decision.
ru
true
false
2) A capital expenditure project becomes desirable when the project is worth more to the firm than the
cost to acquire it.
true
false
3) A capital expenditure project becomes desirable when the present value of the cash flow generated by
the project exceeds the project's present value of cost.
true
false
4) Optimal capital structure determines the least expensive sources of funds for the firm to borrow.
true
false
5) Optimal capital structure determines how much debt the firm should have in relation to its level of
equity.
true
false
6) Capital structure determines the level of current assets that is required to maintain the firm's operations.
true
false
7) Capital structure determines how much risk is associated with the future cash flows of a project.
true
2|Page
, Te
ch
false
Gu
8) Determining when a supplier should be paid is a capital structure decision.
ru
true
false
9) Establishing the accounts receivable policies is a capital structure decision.
true
false
10) Determining the amount of money to borrow to finance a 10-year project is a capital structure
decision.
true
false
11) Deciding if a new project should be accepted is a working capital decision.
true
false
12) When evaluating a project in which a firm might invest, the size but not the timing of the cash flows
is important.
true
false
13) Working capital management addresses the firm's appropriate level of inventory.
true
false
14) Common stockholders or limited partners can lose, at most, what they have invested in a firm.
true
3|Page
, Te
ch
false
Gu
15) Partnership income is treated as personal income of the partners.
ru
true
false
16) A limited partner can lose his or her investment in the partnership.
true
false
17) Maximization of the current earnings of the firm is the main goal of the financial manager.
true
false
18) The primary goal of a financial manager should be to maximize the value of shares issued to new
investors in the corporation.
true
false
19) The primary goal of financial management is to minimize the corporate tax liability.
true
false
20) Control of the firm ultimately rests with board of directors. They elect the management, who, in turn,
lead the company.
true
false
4|Page
