TesT bank FOR:
Foundations of Finance
Arthur J. Keown, John D. Martin, J William Petty
M
10th Edition
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D
CP
Oa
Ns
Nsv
Oi
ISb
SeEs
U
R
Passvibes @Passvibes
, Foundations of Finance, 10e (Keown/Martin/Petty)
Chapter 1 An Introduction to the Foundations of Financial Management
Learning Objective 1.1
M
1) Financial management deals with the maintenance and creation of economic value or wealth.
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Answer: TRUE
Diff: 1 Page Ref: 3
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Keywords: Financial Management
CP
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
Oa
2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the
corporation's stock price.
Ns
Answer: FALSE
Diff: 1 Page Ref: 4
Nsv
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
Oi
AACSB: Reflective Thinking
ISb
3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's
shareholders.
SeEs
Answer: FALSE
Diff: 1 Page Ref: 3
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
U
AACSB: Reflective Thinking
R
4) Shareholder wealth maximization means maximizing the price of the existing common stock.
Answer: TRUE
Diff: 1 Page Ref: 3
Med C
Passvibes @Passvibes
, Keywords: Shareholder Wealth, Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
M
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.
E@
Answer: TRUE
Diff: 2 Page Ref: 4
D
Keywords: Goal of the Firm, Maximize Shareholder Wealth
Learning Obj.: L.O. 1.1
CP
AACSB: Reflective Thinking
Oa
Ns
Nsv
Oi
ISb
SeEs
U
R
Med C
Passvibes @Passvibes
, 6) Corporate managers should accept investment projects that maximize profits in the short run because
of the time value of money.
Answer: FALSE
Diff: 2 Page Ref: 4
M
Keywords: Goal of the Firm, Profits, Time Value of Money
Learning Obj.: L.O. 1.1
E@
AACSB: Reflective Thinking
D
7) The goal of the firm's financial managers should be the maximization of the total value of the firm's
stock.
CP
Answer: TRUE
Diff: 1 Page Ref: 3
Oa
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
Ns
AACSB: Reflective Thinking
Nsv
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 to buy the
corporation's stock.
Oi
Answer: FALSE
Diff: 1 Page Ref: 4
ISb
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
SeEs
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.
U
Answer: FALSE
Diff: 1 Page Ref: 4
R
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
Med C
Passvibes @Passvibes
Foundations of Finance
Arthur J. Keown, John D. Martin, J William Petty
M
10th Edition
E@
D
CP
Oa
Ns
Nsv
Oi
ISb
SeEs
U
R
Passvibes @Passvibes
, Foundations of Finance, 10e (Keown/Martin/Petty)
Chapter 1 An Introduction to the Foundations of Financial Management
Learning Objective 1.1
M
1) Financial management deals with the maintenance and creation of economic value or wealth.
E@
Answer: TRUE
Diff: 1 Page Ref: 3
D
Keywords: Financial Management
CP
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
Oa
2) Each financial decision made by a corporate manager can be evaluated by its direct impact on the
corporation's stock price.
Ns
Answer: FALSE
Diff: 1 Page Ref: 4
Nsv
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
Oi
AACSB: Reflective Thinking
ISb
3) The fundamental goal of a business is to maximize the retained earnings available to the corporation's
shareholders.
SeEs
Answer: FALSE
Diff: 1 Page Ref: 3
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
U
AACSB: Reflective Thinking
R
4) Shareholder wealth maximization means maximizing the price of the existing common stock.
Answer: TRUE
Diff: 1 Page Ref: 3
Med C
Passvibes @Passvibes
, Keywords: Shareholder Wealth, Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
M
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.
E@
Answer: TRUE
Diff: 2 Page Ref: 4
D
Keywords: Goal of the Firm, Maximize Shareholder Wealth
Learning Obj.: L.O. 1.1
CP
AACSB: Reflective Thinking
Oa
Ns
Nsv
Oi
ISb
SeEs
U
R
Med C
Passvibes @Passvibes
, 6) Corporate managers should accept investment projects that maximize profits in the short run because
of the time value of money.
Answer: FALSE
Diff: 2 Page Ref: 4
M
Keywords: Goal of the Firm, Profits, Time Value of Money
Learning Obj.: L.O. 1.1
E@
AACSB: Reflective Thinking
D
7) The goal of the firm's financial managers should be the maximization of the total value of the firm's
stock.
CP
Answer: TRUE
Diff: 1 Page Ref: 3
Oa
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
Ns
AACSB: Reflective Thinking
Nsv
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 to buy the
corporation's stock.
Oi
Answer: FALSE
Diff: 1 Page Ref: 4
ISb
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
SeEs
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.
U
Answer: FALSE
Diff: 1 Page Ref: 4
R
Keywords: Goal of the Firm
Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
Med C
Passvibes @Passvibes
