can access such technologies), and the potential unintended consequences of genetic modifications on future
generations.From a legal standpoint, laws regulating genetic engineering vary widely by country. In some
places, genetic modification of embryos is banned, while in others, it is allowed under specific conditions.
The legal frameworks in place are often reactive, as the pace of biotechnological advancements often
outpaces the development of appropriate legal standards.#### 10.2 **Stem Cell Research**Stem cell
research, particularly the use of embryonic stem cells, has been a controversial ethical issue for many years.
The potential for stem cells to treat or cure a variety of diseases raises significant hope in the
Test Bank For
Fundamentals of Corporate Finance, 3rd Edition Cdn. Ed. (Berk et al.)
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 Type: TF
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
2) 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.
E) It allows us to produce accurate financial statements.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
3) Both personal financial decisions and business financial decisions can best be made by
applying the:
A) Internal Ranking Criteria.
B) Best Alternatives Matrix.
C) Valuation Principle.
D) Financial Comparison Analysis.
E) Law of One Price.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
,1.2 The Three Types of Firms
1) Partnerships are the most common type of business firm in the world.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
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 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
3) Which of the following types of firms do NOT have limited liability?
A) sole proprietorships
B) limited partnerships
C) private corporations
D) public corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
4) Over 60% of all Canadian business profit is generated by which type of firm?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
,5) What is the most common type of firm in Canada and the world?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
6) Which of the following is typically the major factor in limiting the growth of a sole
proprietorship?
A) The organization of such firms tends to become extremely complicated over time.
B) It is extremely difficult to transfer control of such a firm to a new owner if the present owner
dies or wishes to sell the firm.
C) The amount of money that can be raised by the firm is limited by the fact that the single
owner must make good on all debts.
D) Investors have a great deal of control over the day-to-day running of the firm, leading to
confusion when conflicts in direction arise.
E) The owner's personal reputation is the basis for the business.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
7) Joe is a general partner in a limited partnership firm, while Jane is a limited partner in that
same firm. Which of the following statements regarding their respective relationships to the firm
is correct?
A) Joe has no management authority within the partnership.
B) Jane is legally involved in the managerial decision making of the firm.
C) Jane's liability for the firm's debts consists solely of her investment in the firm.
D) Withdrawal of Jane from the partnership will dissolve that partnership.
E) Jane's liability consists of all the firm's outstanding debts.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
, 8) What is the major way in which the roles and obligations of the owners of a limited liability
partnership differ from the roles and obligations of limited partners in a limited partnership?
A) The owners of a limited liability partnership have personal obligation for debts incurred by
the company.
B) There is no separation between the company and its owners in a limited liability partnership.
C) The owners of a limited liability partnership can withdraw from the company without the
company being dissolved.
D) The owners of a limited liability partnership can take an active role in running the company.
E) The owners of a limited liability partnership are responsible for the negligence of other
partners.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
9) In which of the following ways is a limited liability partnership like a corporation?
A) Both types of firm were created and developed first in Canada.
B) Both can choose to be considered a partnership for tax purposes.
C) All of its owners' liability is restricted to their investment in the firm.
D) It is directly managed by the owners of the firm.
E) Owners have unlimited personal liability for the negligence of those whom they supervise.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
10) Why is it possible for a corporation to enter into contracts, acquire assets, incur obligations,
and enjoy protection against the seizure of its property?
A) The number of owners, and hence the spread of risk among these owners, is not limited.
B) Its owners are liable for any obligations it enters into.
C) The province in which the corporation is incorporated provides safeguards against any
wrongdoing by the corporation.
D) It is a legally defined, artificial entity that is separate from its owners.
E) Corporations represent their owners, who have all of those rights.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
generations.From a legal standpoint, laws regulating genetic engineering vary widely by country. In some
places, genetic modification of embryos is banned, while in others, it is allowed under specific conditions.
The legal frameworks in place are often reactive, as the pace of biotechnological advancements often
outpaces the development of appropriate legal standards.#### 10.2 **Stem Cell Research**Stem cell
research, particularly the use of embryonic stem cells, has been a controversial ethical issue for many years.
The potential for stem cells to treat or cure a variety of diseases raises significant hope in the
Test Bank For
Fundamentals of Corporate Finance, 3rd Edition Cdn. Ed. (Berk et al.)
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 Type: TF
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
2) 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.
E) It allows us to produce accurate financial statements.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
3) Both personal financial decisions and business financial decisions can best be made by
applying the:
A) Internal Ranking Criteria.
B) Best Alternatives Matrix.
C) Valuation Principle.
D) Financial Comparison Analysis.
E) Law of One Price.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.1 Grasp the importance of financial information in both your personal and business
lives
,1.2 The Three Types of Firms
1) Partnerships are the most common type of business firm in the world.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
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 Type: TF
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
3) Which of the following types of firms do NOT have limited liability?
A) sole proprietorships
B) limited partnerships
C) private corporations
D) public corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
4) Over 60% of all Canadian business profit is generated by which type of firm?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
,5) What is the most common type of firm in Canada and the world?
A) sole proprietorships
B) partnerships
C) limited partnerships
D) corporations
E) limited liability partnerships
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
6) Which of the following is typically the major factor in limiting the growth of a sole
proprietorship?
A) The organization of such firms tends to become extremely complicated over time.
B) It is extremely difficult to transfer control of such a firm to a new owner if the present owner
dies or wishes to sell the firm.
C) The amount of money that can be raised by the firm is limited by the fact that the single
owner must make good on all debts.
D) Investors have a great deal of control over the day-to-day running of the firm, leading to
confusion when conflicts in direction arise.
E) The owner's personal reputation is the basis for the business.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
7) Joe is a general partner in a limited partnership firm, while Jane is a limited partner in that
same firm. Which of the following statements regarding their respective relationships to the firm
is correct?
A) Joe has no management authority within the partnership.
B) Jane is legally involved in the managerial decision making of the firm.
C) Jane's liability for the firm's debts consists solely of her investment in the firm.
D) Withdrawal of Jane from the partnership will dissolve that partnership.
E) Jane's liability consists of all the firm's outstanding debts.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
, 8) What is the major way in which the roles and obligations of the owners of a limited liability
partnership differ from the roles and obligations of limited partners in a limited partnership?
A) The owners of a limited liability partnership have personal obligation for debts incurred by
the company.
B) There is no separation between the company and its owners in a limited liability partnership.
C) The owners of a limited liability partnership can withdraw from the company without the
company being dissolved.
D) The owners of a limited liability partnership can take an active role in running the company.
E) The owners of a limited liability partnership are responsible for the negligence of other
partners.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
can access such technologies), and the potential unintended consequences of genetic
modifications on future generations.From a legal standpoint, laws regulating genetic engineering
vary widely by country. In some places, genetic modification of embryos is banned, while in
others, it is allowed under specific conditions. The legal frameworks in place are often reactive,
as the pace of biotechnological advancements often outpaces the development of appropriate
legal standards.#### 10.2 **Stem Cell Research**Stem cell research, particularly the use of
embryonic stem cells, has been a controversial ethical issue for many years. The potential for
stem cells to treat or cure a variety of diseases raises significant hope in the
9) In which of the following ways is a limited liability partnership like a corporation?
A) Both types of firm were created and developed first in Canada.
B) Both can choose to be considered a partnership for tax purposes.
C) All of its owners' liability is restricted to their investment in the firm.
D) It is directly managed by the owners of the firm.
E) Owners have unlimited personal liability for the negligence of those whom they supervise.
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
10) Why is it possible for a corporation to enter into contracts, acquire assets, incur obligations,
and enjoy protection against the seizure of its property?
A) The number of owners, and hence the spread of risk among these owners, is not limited.
B) Its owners are liable for any obligations it enters into.
C) The province in which the corporation is incorporated provides safeguards against any
wrongdoing by the corporation.
D) It is a legally defined, artificial entity that is separate from its owners.
E) Corporations represent their owners, who have all of those rights.
Answer: D
Diff: 1 Type: MC
Skill: Conceptual
Objective: 1.2 Understand the important features of the three main types of firms and see why
the advantages of the corporate form have led it to dominate economic activity
