Chapter 1-3 Finance

Topics: Corporation, Corporate finance, Stock market Pages: 111 (20292 words) Published: June 26, 2013
True / False Questions

1. The liability of sole proprietors is limited to the amount of their investment in the company. FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3

2. General partners have limited personal liability for business debts in a limited partnership. FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Medium
Learning Objective: 1-3

3. The separation of ownership and management is one distinctive feature of corporations. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-3

4. A major disadvantage of partnerships is that they have "double taxation" of profits. FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3

5. Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-2

6. Capital budgeting decisions are used to determine how to raise the cash necessary for investments. FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-1

7. A successful investment is one that increases the value of the firm. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-1

8. BP's committing of $500 million to partnership with University of California–Berkeley to develop new sources of energy is a capital budgeting decision. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Application
Difficulty: Easy
Learning Objective: 1-1

9. Boards of directors are often portrayed as active supporters of top management. FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-3

10. Financial analysts are involved in monitoring and controlling the risk associated with investment projects and financing decisions. TRUE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Medium
Learning Objective: 1-4

11. The primary goal of any company should be to maximize current period profit. FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-5

12. Maximizing profits is the same as maximizing the value of the firm. FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-5

13. Major banks and securities firms protect their reputations by emphasizing their long history and their responsible behavior when seeking new customers. TRUE

AACSB: Ethical Understanding & Reasoning Abilities
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-6

14. Ethical decision making in business can be viewed as a long-term investment in reputation. TRUE

AACSB: Ethical Understanding & Reasoning Abilities
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-6

15. Real assets can be intangible assets.
TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-2

16. Making good investment and financing decisions is the chief task of the financial manager. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-1

17. If a project's value is less than its required investment, then the project is attractive financially. FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-1

18. Pfizer's spending of $7.6 billion in 2006 on research and development of new drugs is a capital budgeting decision but not a financing decision. TRUE

AACSB: Reflective Thinking Skills
Bloom's: Application
Difficulty: Medium...
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