Foundations Of Financial Management 13e by Michael Meehan Stanley
Block, Geoffrey Hirt, Bartley Danielsen, Doug Short (Test Bank All
Chapters, 100% Original Verified, A+ Grade) Answers At The End Of Each
Chapter
Chapter 1
Student name:__________
1) What is the primary goal of financial management?
A) Increased earnings
B) Maximizing cash flow
C) Maximizing shareholder wealth
D) Minimizing risk of the firm
2) Proper risk-return management means that:
A) the firm should take as few risks as possible.
B) consistent with the objectives of the firm, an appropriate trade-off between risk and
return should be determined.
C) the firm should earn the highest return possible.
D) the firm should value future profits more highly than current profits.
3) Some of the effects of high inflation are:
A) the gold standard was eliminated.
B) purchasing power increased.
C) interest rates fall.
D) Phantom profits and undervalued assets.
4) In the past, the study of finance has included:
A) operational efficiency.
B) employee relationships.
C) legal cases.
D) mergers and acquisitions.
5) A financial manager's goal of maximizing current or short-term earnings may NOT be
appropriate because:
A) it considers the timing of the benefits.
B) increased earnings may be accompanied by acceptably higher levels of risk.
C) share ownership is widely dispersed.
D) earnings are subjective; they can be defined in various ways such as accounting or
economic earnings.
Version 1 1
,Chapter 1
6) One of the major disadvantages of a sole proprietorship is:
A) that there is unlimited liability to the owner.
B) the simplicity of decision making.
C) low organizational costs.
D) low operating costs.
7) The partnership form of organization:
A) avoids the double taxation of earnings and dividends found in the corporate form of
organization.
B) usually provides limited liability to the partners.
C) has unlimited life.
D) simplifies decision making.
8) A corporation is NOT:
A) owned by shareholders who enjoy the privilege of limited liability.
B) easily divisible between owners.
C) a separate legal entity with perpetual life.
D) a separate legal entity with limited life.
9) Inflation:
A) increases corporations' reliance on debt for capital expansion needs.
B) creates larger asset values on the firm's historical balance sheet.
C) makes it cheaper (in terms of interest costs) for firms to borrow money.
D) creates stability for investors.
10) Which of the following securities is NOT included as part of the capital market?
A) Common stock
B) Commercial paper
C) Government bonds
D) Preferred stock
Version 1 2
,Chapter 1
11) Maximization of shareholder wealth is a concept in which:
A) increased earnings are of primary importance.
B) profits are maximized on a quarterly basis.
C) virtually all earnings are paid as dividends to common shareholders.
D) optimally increasing the long-term value of the firm is emphasized.
12) Which of the following is NOT a true statement about the goal of maximizing shareholder
wealth?
A) It takes into account the timing of cash-flows.
B) It is a short-run point of view which takes risk into account.
C) It considers risk as a factor.
D) It is a long-run point of view which takes risk into account.
13) Increased international competition can be seen as a motivator to emphasize:
A) asset diversification strategies.
B) the risk side of the risk-return relationship.
C) the return side of the risk-return relationship.
D) an increased investment in risky projects.
14) Corporations can reduce portfolio risk by:
A) narrowing their focus on one successful product.
B) merging with companies in unrelated industries.
C) repurchasing their own stock.
D) selling their own stock.
15) The shift to the return side of the risk-return relationship has occurred because there has
been:
A) a narrower focus on production.
B) an increase in the prevalence of stock splits.
C) a decrease in the use of advanced technology in the production process.
D) an increase in global competition.
Version 1 3
, Chapter 1
16) A corporate buy-back, or the repurchasing of shares, is:
A) an example of balance sheet restructuring.
B) an excellent source of profits when the firm's stock is over-priced.
C) a method of reducing the debt-to-equity ratio.
D) shown as revenue on the income statement.
17) Which of the following is (are) a result of high inflation?
A) Loss from disposal of assets
B) Over-valued liabilities
C) Lower stock price
D) Under-valued assets
18) Institutional investors have more to say about the way publicly owned corporations are
managed through their ability to
A) avoid conflicts of interest
B) enhance diversity of opinion
C) maximize residual value
D) replace poorly performing boards of directors
19) Which of the following are NOT one of the drawbacks of selecting profit maximization as
the primary goal of the firm?
A) risk may increase as profit changes.
B) accurately measuring profit is almost impossible.
C) profit fails to take into account the timing of benefits.
D) profits are measured using Generally Accepted Accounting Principles (GAAP).
20) Agency theory deals with the issue of:
A) when to hire an agent to represent the firm in negotiations.
B) the legal liabilities of a firm if an employee, acting as the firm's agent, injures
someone.
C) the limitations placed on an employee acting as the firm's agent to obligate or bind the
firm.
D) the conflicts that can arise between the viewpoints and motivations of a firm's owners
and managers.
Version 1 4
Block, Geoffrey Hirt, Bartley Danielsen, Doug Short (Test Bank All
Chapters, 100% Original Verified, A+ Grade) Answers At The End Of Each
Chapter
Chapter 1
Student name:__________
1) What is the primary goal of financial management?
A) Increased earnings
B) Maximizing cash flow
C) Maximizing shareholder wealth
D) Minimizing risk of the firm
2) Proper risk-return management means that:
A) the firm should take as few risks as possible.
B) consistent with the objectives of the firm, an appropriate trade-off between risk and
return should be determined.
C) the firm should earn the highest return possible.
D) the firm should value future profits more highly than current profits.
3) Some of the effects of high inflation are:
A) the gold standard was eliminated.
B) purchasing power increased.
C) interest rates fall.
D) Phantom profits and undervalued assets.
4) In the past, the study of finance has included:
A) operational efficiency.
B) employee relationships.
C) legal cases.
D) mergers and acquisitions.
5) A financial manager's goal of maximizing current or short-term earnings may NOT be
appropriate because:
A) it considers the timing of the benefits.
B) increased earnings may be accompanied by acceptably higher levels of risk.
C) share ownership is widely dispersed.
D) earnings are subjective; they can be defined in various ways such as accounting or
economic earnings.
Version 1 1
,Chapter 1
6) One of the major disadvantages of a sole proprietorship is:
A) that there is unlimited liability to the owner.
B) the simplicity of decision making.
C) low organizational costs.
D) low operating costs.
7) The partnership form of organization:
A) avoids the double taxation of earnings and dividends found in the corporate form of
organization.
B) usually provides limited liability to the partners.
C) has unlimited life.
D) simplifies decision making.
8) A corporation is NOT:
A) owned by shareholders who enjoy the privilege of limited liability.
B) easily divisible between owners.
C) a separate legal entity with perpetual life.
D) a separate legal entity with limited life.
9) Inflation:
A) increases corporations' reliance on debt for capital expansion needs.
B) creates larger asset values on the firm's historical balance sheet.
C) makes it cheaper (in terms of interest costs) for firms to borrow money.
D) creates stability for investors.
10) Which of the following securities is NOT included as part of the capital market?
A) Common stock
B) Commercial paper
C) Government bonds
D) Preferred stock
Version 1 2
,Chapter 1
11) Maximization of shareholder wealth is a concept in which:
A) increased earnings are of primary importance.
B) profits are maximized on a quarterly basis.
C) virtually all earnings are paid as dividends to common shareholders.
D) optimally increasing the long-term value of the firm is emphasized.
12) Which of the following is NOT a true statement about the goal of maximizing shareholder
wealth?
A) It takes into account the timing of cash-flows.
B) It is a short-run point of view which takes risk into account.
C) It considers risk as a factor.
D) It is a long-run point of view which takes risk into account.
13) Increased international competition can be seen as a motivator to emphasize:
A) asset diversification strategies.
B) the risk side of the risk-return relationship.
C) the return side of the risk-return relationship.
D) an increased investment in risky projects.
14) Corporations can reduce portfolio risk by:
A) narrowing their focus on one successful product.
B) merging with companies in unrelated industries.
C) repurchasing their own stock.
D) selling their own stock.
15) The shift to the return side of the risk-return relationship has occurred because there has
been:
A) a narrower focus on production.
B) an increase in the prevalence of stock splits.
C) a decrease in the use of advanced technology in the production process.
D) an increase in global competition.
Version 1 3
, Chapter 1
16) A corporate buy-back, or the repurchasing of shares, is:
A) an example of balance sheet restructuring.
B) an excellent source of profits when the firm's stock is over-priced.
C) a method of reducing the debt-to-equity ratio.
D) shown as revenue on the income statement.
17) Which of the following is (are) a result of high inflation?
A) Loss from disposal of assets
B) Over-valued liabilities
C) Lower stock price
D) Under-valued assets
18) Institutional investors have more to say about the way publicly owned corporations are
managed through their ability to
A) avoid conflicts of interest
B) enhance diversity of opinion
C) maximize residual value
D) replace poorly performing boards of directors
19) Which of the following are NOT one of the drawbacks of selecting profit maximization as
the primary goal of the firm?
A) risk may increase as profit changes.
B) accurately measuring profit is almost impossible.
C) profit fails to take into account the timing of benefits.
D) profits are measured using Generally Accepted Accounting Principles (GAAP).
20) Agency theory deals with the issue of:
A) when to hire an agent to represent the firm in negotiations.
B) the legal liabilities of a firm if an employee, acting as the firm's agent, injures
someone.
C) the limitations placed on an employee acting as the firm's agent to obligate or bind the
firm.
D) the conflicts that can arise between the viewpoints and motivations of a firm's owners
and managers.
Version 1 4
