Test Bank for Foundations of Finance (10th Edition) – Arthur J. Keown – ISBN 9780135160619 – Complete Test Bank for Chapters 1–10 with Verified Q&As

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Test Bank For Foundations Of Finance 10th Edition
By Arthur J Keown
All Chapters (1-10) |Q&As Verified| Grade A+ Assured
ISBN 9780135160619

,Foundations of Finance, 10e (Keown/Martin/Petty)

Chapter 1 An Introduction to the Foundations of Financial Management


Learning Objective 1.1


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

wealth.

CORRECT ANSWER TRUE

Diff: 1 Page Ref: 3
Keywords: Financial Management
Learning Obj.: L.O. 1.1

AACSB: Reflective Thinking


2) Each financial decision made by a corporate manager can be evaluated by its direct impact
on the corporation's stock price.
CORRECT ANSWER

FALSE Diff: 1 Page

Ref: 4

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


3) The fundamental goal of a business is to maximize the retained earnings available to the
corporation's shareholders.
CORRECT ANSWER

FALSE Diff: 1 Page

Ref: 3

Keywords: Goal of the Firm

Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


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

stock.
CORRECT ANSWER TRUE

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,Diff: 1 Page Ref: 3
Keywords: Shareholder Wealth, Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking



5) It is important to evaluate a corporate manager's financial decision by measuring the effect the
decision
should have on the corporation's stock price if everything else were held
constant.

CORRECT ANSWER TRUE
Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Maximize Shareholder Wealth

Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking




6) Corporate managers should accept investment projects that maximize profits in the short run
because of the time value of money.
CORRECT ANSWER
FALSE Diff: 2 Page
Ref: 4

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


7) The goal of the firm's financial managers should be the maximization of the total value of the
firm's stock.
CORRECT ANSWER

TRUE Diff: 1 Page
Ref: 3

Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1

AACSB: Reflective Thinking


8) The payment of a dividend to current shareholders will have no impact on a corporation's
share price because the cash paid is not available to future potential shareholders who may want

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, to buy the corporation's stock.
CORRECT ANSWER
FALSE Diff: 1 Page
Ref: 4

Keywords: Goal of the Firm

Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking


9) One problem with maximization of shareholder wealth as a goal is that it ignores risk taken
by the firm's financial decisions.
CORRECT ANSWER
FALSE Diff: 1 Page
Ref: 4

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

10) The goal of profit maximization ignores the risk of financial
decisions. CORRECT ANSWER FALSE

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

AACSB: Reflective Thinking


11) Only a firm's financial decisions affect its stock

prices. CORRECT ANSWER FALSE

Diff: 1 Page Ref: 4
Keywords: Determinants of Stock Price
Learning Obj.: L.O. 1.1

AACSB: Reflective Thinking


12) Shareholders react to poor investment or dividend decisions by causing the total value of the
firm's stock to fall, and they react to good decisions by bidding the price of the stock up.
CORRECT ANSWER
TRUE Diff: 2 Page

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