Test Bank Fundamentals of Corporate Finance, 4th Canadian Edition By Berk, DeMarzo, Stangeland, Marosi, Harford 2023| Complete A+

Fundamentals of Corporate Finance, 4e, GE (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 firm 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
firm?
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 firm 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