TEST BANK For Foundations of Financial Management 18th Edition By stanley Block, Geoffrey Hirt, Bartley Danielsen | All Chapter Complete 1-21 | Newest Version.

As finance emerged as a new field, much emphasis was placed on mergers and acquisitions. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Inflation is assumed to be a temporary problem that does not affect financial decisions. Answer: FALSE Difficulty: 1 Easy Topic: Financial management decisions Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Financial capital is composed of long-term plant and equipment, as well as other tangible investments. Answer: FALSE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Real capital is composed of long-term plant and equipment. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember 2 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) During the 1930s, financial practice revolved around such topics as the preservation of capital, maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Recently, the emphasis of financial management has been on the relationship between risk and return. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 8) The first Nobel Prizes given to finance professors were for their contributions to capital structure theory and portfolio theories of risk and return. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember 3 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) How investors handle risk is an important topic that usually only economists observe. Answer: FALSE Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on. Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Mortgage-backed securities were devalued by accounting standards because of the high credit ratings (AAA). Answer: FALSE Explanation: These securities were devalued because borrowers defaulted on their loans and didn't have the financial means to back up their loans in other ways. Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) "Credit default swaps" are one of several tools that Congress and the President of the United States have jointly developed to ease the financial crisis that began in 2008. Answer: FALSE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 4 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 12) The Dodd-Frank Act was created by Congress along with its goals and regulatory responsibility, but it is facilitated by various agencies. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) The Dodd-Frank Act contains the Volcker Rule, which encourages financial institutions to allow for more speculative investments for average investors. Answer: FALSE Difficulty: 2 Medium Topic: Ethics, governance, and regulation Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14) The Dodd-Frank Act's oversight allowing regulation of banking fees and available products has been considered as not being in the best interests of a free market. Answer: TRUE Difficulty: 2 Medium Topic: Ethics, governance, and regulation Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15) The Internet impacts e-commerce by creating a mechanism for improved communications between a business, its customers, and its suppliers. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 5 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 16) The Internet is responsible for many new business models. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 17) Businesses will increasingly rely on B2B Internet applications to speed up the cash flows through their firms. Answer: TRUE Difficulty: 1 Easy Topic: Introduction to corporate finance Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18) Sole proprietorship means single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Under the 2017 Tax Cuts and Jobs Act, the most significant change is that the corporate tax rate goes from 35 percent to 21 percent, which puts U.S. Companies on competitive footing with many other countries. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 20) Profits of sole proprietorships are taxed at corporate tax rates. Answer: FALSE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Sole Proprietorships, partnerships and limited liability partnerships are considered pass through forms of organizations because the income passes through to the owners and is taxed at the owner's individual tax rate. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) To reduce the burden on small firms, the government established a 25 percent deduction of qualified business income from pass through businesses. Answer: FALSE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) There is unlimited liability in a general partnership. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 24) A limited partnership limits the profits partners may receive. Answer: FALSE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting, and a number of other areas. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) In terms of revenues and profits, the corporation is by far the most important form of business organization in the United States. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 26) As noted in Finance in Action, initial public offerings have now increased because long-term results are favored by shareholders and institutional investors. Answer: FALSE Difficulty: 2 Medium Topic: Initial public offerings Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 27) Dividends paid to corporate stockholders have already been taxed once as corporate income. Answer: TRUE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 8 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 28) One advantage of the corporate form of organization is that income received by stockholders is not taxable since the corporation already paid taxes on the income distributed. Answer: FALSE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 29) A corporation must have more than 100 stockholders to qualify for Subchapter S designation. Answer: FALSE Difficulty: 2 Medium Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Profits of a Subchapter S corporation are taxed at corporate tax rates. Answer: FALSE Difficulty: 1 Easy Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) The formation of a Subchapter S corporation is a way to circumvent the double taxation of a small corporation. Answer: TRUE Difficulty: 2 Medium Topic: Forms of business organization Learning Objective: 01-02 A firm can have many different forms of organization. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 9 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 32) Corporate governance issues have become less important to the financial community during the first decade of the new millennium. Answer: FALSE Difficulty: 1 Easy Topic: Ethics, governance, and regulation Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Agency theory examines the relationship between companies and their customers. Answer: FALSE Difficulty: 1 Easy Topic: Agency costs and problems Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Institutional investors have had increasing influence over corporations with their ability to vote with large blocks of stock and replace poorly performing boards of directors. Answer: TRUE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders. Answer: FALSE Difficulty: 1 Easy Topic: Agency costs and problems Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 36) The Sarbanes-Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to select their preferred candidates to the board of directors. Answer: FALSE Difficulty: 2 Medium Topic: Ethics, governance, and regulation Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 37) A major focus of the Sarbanes-Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities, and income in their financial statements. Answer: TRUE Difficulty: 2 Medium Topic: Ethics, governance, and regulation Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) The Sarbanes-Oxley Act is primarily intended to increase public scrutiny of private companies that had previously been exempt from many public disclosure requirements. Answer: FALSE Difficulty: 2 Medium Topic: Ethics, governance, and regulation Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 39) Timing is not a particularly important consideration in financial decisions. Answer: FALSE Difficulty: 1 Easy Topic: Financial management decisions Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation EMAIL ME: For help with report, Assignment, Essay and thesis writing. 11 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 40) The higher the profit of a firm, the higher the value the firm is in the market. Answer: FALSE Difficulty: 2 Medium Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 41) There are some serious problems with the financial goal of maximizing the earnings of the firm. Answer: TRUE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 42) Maximizing Shareholder wealth can be difficult due to daily fluctuations in stock value in combination with changing investor expectations. Answer: TRUE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 43) Maximizing the earnings of the firm is the main goal of financial management. Answer: FALSE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 12 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 44) The ultimate measure of performance is not what the firm profits, but how the profits are valued by the investor. Answer: TRUE Difficulty: 2 Medium Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 45) Because socially desirable goals can hinder profitability in many instances, managers should not try to operate under the assumption of wealth maximization. Answer: FALSE Difficulty: 2 Medium Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 46) Insider trading involves the use of information not available to the general public to make profits from trading in a company's stock. Answer: TRUE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) If an investor hears of a large change that a company is going to make through a news article and reacts quicker than any other investor, it is considered insider trading. Answer: FALSE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 48) When an investor has the ability to control how the stock price changes, that is considered insider trading. Answer: FALSE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Social responsibility and profit maximization are synonymous. Answer: FALSE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking; Ethics Accessibility: Keyboard Navigation 50) Irrational exuberance is when companies have stock that is undervalued. Answer: FALSE Difficulty: 1 Easy Topic: Goal of financial management Learning Objective: 01-04 The primary goal of financial managers is to maximize the wealth of the shareholders. Bloom's: Understand AACSB: Analytical Thinking; Ethics Accessibility: Keyboard Navigation