Fundamentals of Corporate Finance, Berk - Exam Preparation Test Bank (Downloadable Doc)

Fundamentals of Corporate Finance, 3e (Berk/DeMarzo/Harford)

Chapter 1 Corporate Finance and the Financial Manager



1.1 Why Study Finance?



1) The Valuation Principle shows how to make the costs and benefits of a decision comparable so
that we can evaluate them properly.

Answer: TRUE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Previous Edition




2) Financial decisions require that you weigh alternatives in strictly monetary terms.

Answer: FALSE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Revised




3) Which of the following best describes why the Valuation Principle is a key concept in making
financial decisions?

A) It shows how to assign monetary value to intangibles such as good health and well-being.

B) It allows fixed assets and liquid assets to be valued correctly.

,C) It gives a good indication of the net worth of a person, item, or company and can be used to
estimate any changes in that net worth.

D) It shows how to make the costs and benefits of a decision comparable so that we can weigh
them properly.

Answer: D

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Previous Edition




1.2 The Four Types of Firms



1) Partnerships are the most common type of business firms in the world.

Answer: FALSE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Revised

2) Corporations have come to dominate the business world through their ability to raise large
amounts of capital by sale of ownership shares to anonymous outside investors.

Answer: TRUE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

,Author: DS

Question Status: Revised




3) Which of the following types of firms does NOT have limited liability?

A) sole proprietorships

B) limited partnerships

C) corporations

D) none of the above

Answer: A

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Revised




4) Over four-fifths of all U.S. business revenue is generated by which type of firms?

A) sole proprietorships

B) partnerships

C) limited partnerships

D) corporations

Answer: D

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

, Question Status: Revised




5) What is the most common type of firms in the United States and the world?

A) sole proprietorships

B) partnerships

C) limited partnerships

D) corporations

Answer: A

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Previous Edition