Test Bank for Fundamentals of Corporate Finance -pvl3701_exam_pack_-law-of-property

Test Bank for Fundamentals of Corporate Finance -pvl3701_exam_pack_-law-of-property.1. The financial manager is responsible for making decisions that are in the best interest of the firm's owners. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 2. The demand for a potential business product, as well as the identification of what product or services is to be produced, are both contained in a business plan. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 3. The local Republican Party is a stakeholder in a local firm that makes no political donations to either party. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 4. A patent is a productive asset for a technology-based firm. A) True B) False Ans: A 1-1 Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 5. Intangible assets generate most of a manufacturing firm's cash flows. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 6. The most fundamental way that a business can grow in size is from the reinvestment of cash flows or earnings. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 7. When bankruptcy occurs, the firm will always be liquidated. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 8. Capital assets are generally short term in nature. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 9. A good capital budgeting decision is one in which the benefits are worth more to the firm than the cost of the asset. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 10. The financing decision determines how firms raise cash to pay for their investments. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 11. The dollar difference between current assets and total liabilities is called working capital. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 12. A sole proprietorship is an owner's only business. A) True B) False Ans: B 1-3 Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 13. The greatest number of businesses in the United States are corporations. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 14. Unlimited liability means that the owner of a firm is responsible for paying all the firm's bills. A) True B) False Ans: A Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 15. The process of transferring ownership of a sole proprietorship is relatively easy. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 16. General partners in a business have limited liability with regard to their firm's obligations. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 17. Most large corporations are incorporated in New York because of its favorable tax treatment of corporate income and its statutes protecting the rights of its owners. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 18. Corporations do not have their income subject to double taxation. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 19. Privately held corporations are allowed to have shareholders. A) True B) False Ans: A Format: True/False Learning Objective: LO 3 Level of Difficulty: Easy 20. The treasurer of a corporation usually reports to the CFO of the firm. A) True B) False Ans: A 1-5 Format: True/False Learning Objective: LO 3 Level of Difficulty: Easy 21. The external auditors of the firm report their findings directly to the CFO of the firm. A) True B) False Ans: B Format: True/False Learning Objective: LO 4 Level of Difficulty: Easy 22. Maximizing revenue should be the goal of the firm. A) True B) False Ans: B Format: True/False Learning Objective: LO 5 Level of Difficulty: Easy 23. An agency problem can arise when the agent of the firm is the sole owner of the firm. A) True B) False Ans: B Format: True/False Learning Objective: LO 5 Level of Difficulty: Medium 24. The owners of a firm are unaffected by agency costs. A) True B) False Ans: B Format: True/False Learning Objective: LO 6 Level of Difficulty: Easy 25. Corruption in business does not affect the functioning of the financial markets. A) True B) False Ans: B Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 26. To start a business, the owners need A) a market where there is demand for their product. B) a clear vision of what products or services they want to produce. C) the know-how to successfully market their product. D) all of the above. Ans: D Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 27. A stakeholder is A) anyone geographically close to the firm's headquarters. B) anyone with a claim on the cash flows of the firm. C) any governmental agency. D) all of the above. Ans: B 1-7 Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 28. If you have loaned capital to a firm, then you could be A) a shareholder. B) a stakeholder. C) a partner. D) all of the above. Ans: B Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 29. Which of the following are stakeholders? A) a shareholder B) a lender C) the IRS D) all of the above Ans: D Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 30. A trademark is an example of A) a productive asset. B) an intangible asset. C) a nebulous asset. D) none of the above. Ans: B Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 31. Which of the following is a basic source of funds for the firm? A) debt B) equity C) asset liquidations D) a and b above Ans: D Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 32. The cash remaining after the firm has met its operating expenses, payments to creditors, and taxes is called A) earnings per share. B) capital contributed in excess of par. C) residual cash. D) assets. Ans: C Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 33. Cash dividends are paid out of A) residual cash. B) liquidated assets. C) long-term debt. D) all of the above. Ans: A 1-9 Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 34. Current liabilities are liabilities that A) will be converted to cash within a year. B) must be paid within a year. C) will be converted to equity within a year. D) none of the above Ans: B Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 35. Capital budgeting involves A) how a firm's day-to-day financial matters should be managed. B) how the firm should finance its assets. C) which productive assets the firm should employ. D) all of the above. Ans: C Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 36. Working capital management decisions involve A) how a firm's day-to-day financial matters should be managed. B) how the firm should finance its assets. C) which productive assets the firm should employ. D) all of the above. Ans: A Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 37. Capital budgeting decisions generally involve A) the fixed asset portion of the balance sheet. B) the short-term portion of the balance sheet. C) the current liability portion of the balance sheet. D) all of the above. Ans: A Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 38. A good capital budgeting decision is A) one in which the benefits of the project are equal to the cost of the asset. B) one in which the benefits of the project are less than the cost of the asset. C) one in which the benefits of the project are more than the cost of the asset. D) all of the above. Ans: C Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Medium 39. Financial markets in which equity and debt instruments with maturities greater than one year are traded are called A) money markets. B) capital markets. C) stock markets. D) none of the above. Ans: B 1-11 Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty: Easy 40. Profitability of a firm can be negatively affected by A) too much inventory. B) too little inventory. C) either a or b. D) neither a nor b. Ans: C Format: Multiple Choice Learning Objective: LO 2 Level of Difficulty: Easy 41. About 75 percent of all businesses in the United States are A) sole proprietorships. B) partnerships. C) corporations. D) limited liability partnerships. Ans: A Format: Multiple Choice Learning Objective: LO 2 Level of Difficulty: Medium 42. Which of the following business organizational forms subjects the owner(s) to unlimited liability? A) sole proprietorship B) partnership C) corporation D) a and b Ans: D Format: Multiple Choice Learning Objective: LO 2 Level of Difficulty: Medium.