Corporate Finance, 12e (Ross)
Chapter 1 Introduction to Corporate Finance
1) The treasurer and the controller of a corporation generally report to the:
A) board of directors.
B) chairman of the board.
C) chief executive officer.
D) president.
E) chief financial officer.
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Which one of the following statements correctly depicts the common chain of command in a
corporation?
A) The information systems manager reports to the treasurer.
B) The credit manager reports to the treasurer.
C) The controller reports to the chief executive officer.
D) The tax manager reports to the treasurer.
E) The capital expenditures manager reports to the controller.
Answer: B
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,3) Which one of the following is a capital budgeting decision?
A) Determining how much debt should be borrowed from a particular lender
B) Deciding whether or not a new production facility should be built
C) Deciding when to repay a long-term debt
D) Determining how much inventory to keep on hand
E) Deciding how much credit to grant to a particular customer
Answer: B
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital budgeting
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) Which one of these is a correct definition?
A) Net working capital equals current assets plus current liabilities.
B) Current liabilities are debts that must be repaid in 18 months or less.
C) Current assets are assets with short lives, such as accounts receivable.
D) Long-term debt is defined as a residual claim on a firm's assets.
E) Tangible assets are fixed assets such as patents.
Answer: C
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Introduction to corporate finance
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) The corporate controller is generally responsible for which one of these functions?
A) Capital expenditures
B) Cash management
C) Tax reporting
D) Financial planning
E) Credit management
Answer: C
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,6) The corporate treasurer oversees which one of these areas?
A) Financial planning
B) Cost accounting
C) Tax reporting
D) Information systems
E) Financial accounting
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) A firm's capital structure refers to the firm's:
A) mixture of various types of production equipment.
B) investment selections for its excess cash reserves.
C) combination of cash and cash equivalents.
D) combination of accounts appearing on the left side of its balance sheet.
E) proportions of financing from current and long-term debt and equity.
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital structure
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Short-term finance deals with:
A) the timing of cash flows.
B) acquiring and selling fixed assets.
C) financing long-term projects.
D) capital budgeting.
E) issuing additional shares of common stock.
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Cash management - general
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, 9) Which one of these accounts is included in net working capital?
A) Copyright
B) Manufacturing equipment
C) Common stock
D) Long-term debt
E) Inventory
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Net working capital
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
10) The process of planning and managing a firm's long-term assets is called:
A) working capital management.
B) cash management.
C) cost accounting management.
D) capital budgeting.
E) capital structure management.
Answer: D
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital budgeting
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
11) Any debt that must be repaid within the next year is recorded on the balance sheet as:
A) a current liability.
B) long-term debt.
C) an intangible asset.
D) accounts receivable.
E) a current asset.
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Balance sheet
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 1 Introduction to Corporate Finance
1) The treasurer and the controller of a corporation generally report to the:
A) board of directors.
B) chairman of the board.
C) chief executive officer.
D) president.
E) chief financial officer.
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Which one of the following statements correctly depicts the common chain of command in a
corporation?
A) The information systems manager reports to the treasurer.
B) The credit manager reports to the treasurer.
C) The controller reports to the chief executive officer.
D) The tax manager reports to the treasurer.
E) The capital expenditures manager reports to the controller.
Answer: B
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,3) Which one of the following is a capital budgeting decision?
A) Determining how much debt should be borrowed from a particular lender
B) Deciding whether or not a new production facility should be built
C) Deciding when to repay a long-term debt
D) Determining how much inventory to keep on hand
E) Deciding how much credit to grant to a particular customer
Answer: B
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital budgeting
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) Which one of these is a correct definition?
A) Net working capital equals current assets plus current liabilities.
B) Current liabilities are debts that must be repaid in 18 months or less.
C) Current assets are assets with short lives, such as accounts receivable.
D) Long-term debt is defined as a residual claim on a firm's assets.
E) Tangible assets are fixed assets such as patents.
Answer: C
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Introduction to corporate finance
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) The corporate controller is generally responsible for which one of these functions?
A) Capital expenditures
B) Cash management
C) Tax reporting
D) Financial planning
E) Credit management
Answer: C
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
,6) The corporate treasurer oversees which one of these areas?
A) Financial planning
B) Cost accounting
C) Tax reporting
D) Information systems
E) Financial accounting
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Management organization and roles
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
7) A firm's capital structure refers to the firm's:
A) mixture of various types of production equipment.
B) investment selections for its excess cash reserves.
C) combination of cash and cash equivalents.
D) combination of accounts appearing on the left side of its balance sheet.
E) proportions of financing from current and long-term debt and equity.
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital structure
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Short-term finance deals with:
A) the timing of cash flows.
B) acquiring and selling fixed assets.
C) financing long-term projects.
D) capital budgeting.
E) issuing additional shares of common stock.
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Cash management - general
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
, 9) Which one of these accounts is included in net working capital?
A) Copyright
B) Manufacturing equipment
C) Common stock
D) Long-term debt
E) Inventory
Answer: E
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Net working capital
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
10) The process of planning and managing a firm's long-term assets is called:
A) working capital management.
B) cash management.
C) cost accounting management.
D) capital budgeting.
E) capital structure management.
Answer: D
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Capital budgeting
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
11) Any debt that must be repaid within the next year is recorded on the balance sheet as:
A) a current liability.
B) long-term debt.
C) an intangible asset.
D) accounts receivable.
E) a current asset.
Answer: A
Difficulty: 1 Easy
Section: 1.1 What is Corporate Finance?
Topic: Balance sheet
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
