, TESTBANK FOR Fundamentals of Corporate
Finance 6e Parrino
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Corporate Finance, 6e (Parrino)
Chapter 1 The Financial Manager and the Firm
1) What is the primary responsibility of a financial manager?
A) To make decisions that benefit the firm's suppliers
B) To make decisions in the best interest of the shareholders
C) To ensure that the firm minimizes taxes
D) To prioritize short-term profits over long-term growth
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: FSA / Process and Resource Management Perspectives
2) Which of the following is considered an intangible productive asset?
A) Manufacturing equipment
B) Cash
C) A patent
D) An office building
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
3) Which of the following accurately reflects the relationship between productive assets and cash
flows in a manufacturing firm?
A) Intangible assets typically account for the majority of cash flows generated by a
manufacturing firm.
B) Productive assets, including both tangible and intangible assets, are essential for generating
cash flows for a manufacturing firm.
C) The cash flows of a manufacturing firm are primarily derived from its operational expenses
rather than its assets.
D) Manufacturing firms rely solely on tangible assets to produce cash flows.
Answer: B
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
1
,4) To foster long-term growth, businesses should focus on which of the following strategies?
A) Reinvesting their cash flows or earnings back into the business.
B) Paying out all profits as dividends to shareholders.
C) Limiting investments to only high-risk ventures.
D) Minimizing reinvestment in new projects.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: FSA / Process and Resource Management Perspectives
5) In the event of bankruptcy, what is the likely process regarding a company's assets?
A) The assets are always liquidated without exception.
B) The company will only be reorganized, not liquidated.
C) The company may be reorganized or liquidated.
D) All assets will be distributed equally among owners and creditors.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Corporate Finance / Resource Management
6) What is a key characteristic of capital assets?
A) They are purchased primarily for resale within one year.
B) They are intended for long-term use in generating revenues.
C) They must be liquidated quickly to meet financial obligations.
D) They include only intangible assets.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
2
,7) In capital budgeting, what is the primary goal of investing in a project?
A) To ensure the project has a quick return on investment.
B) To guarantee that costs are minimized.
C) To maximize the value of the firm by ensuring benefits exceed costs.
D) To increase market share regardless of profitability.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Analyze
AACSB: Analytic
IMA / AICPA: Budget Preparation / Resource Management
8) Why is it important for a firm to carefully consider its mix of debt and equity?
A) It determines the number of employees the firm can hire.
B) It affects the firm's financing costs and potential bankruptcy risk.
C) It has no significant implications for the firm's operations.
D) It ensures that the firm remains privately owned.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Understand
AACSB: Analytic
IMA / AICPA: Investment Decisions / Strategic/Critical Thinking
9) If a firm has total current assets of $500,000 and total current liabilities of $300,000 and total
equity of $260,000, what is the firm's net working capital?
A) $200,000
B) $240,000
C) $800,000
D) $500,000
Answer: A
Explanation: $200,000 (Net working capital = Total Current Assets - Total Current Liabilities
= $500,000 - $300,000)
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
3
,10) To start a business, the owners need:
A) wealth.
B) a clear vision of what products or services they want to produce.
C) employees.
D) productive assets such as buildings, technology, or patents.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
11) A stakeholder is:
A) someone geographically close to the firm's headquarters.
B) someone who has a claim on the cash flows of the firm.
C) a business organization.
D) someone working for the competitor of the firm.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
12) If you have provided capital to a firm, then you are:
A) a manager.
B) a stakeholder.
C) a partner.
D) an employee.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
4
,13) Which of the following is NOT a stakeholder?
A) An employee
B) A lender
C) The IRS
D) The owner
Answer: D
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
14) A trademark is an example of:
A) a liquid asset.
B) an intangible asset.
C) a contingent asset.
D) a physical asset.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
15) Which of the following is NOT a characteristic of a shareholder?
A) Expects to receive dividends
B) Expects to receive a capital gain on an investment
C) Expects to receive interest
D) Expects to have rights as defined in the corporation's charter and bylaws
Answer: D
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
5
,16) Which of the following is a basic source of funds for a firm?
A) Debt
B) Equity
C) Asset liquidations
D) Both A and B
Answer: D
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
17) The cash remaining with the firm after paying its operating expenses, making payments to
creditors, and taxes is called:
A) earnings per share.
B) capital contributed in excess of par.
C) residual cash flows.
D) assets.
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
18) Cash dividends are paid out of:
A) residual cash flows.
B) liquidated assets.
C) long-term debt.
D) payroll fund.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
6
,19) Current liabilities are liabilities that:
A) will be converted to cash within a year.
B) must be paid within a year.
C) will be converted to equity within a year.
D) are contingent depending upon a future outcome.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
20) Current assets are assets that:
A) will be converted to cash within a year.
B) must be paid within a year.
C) will be converted to equity within a year.
D) must be depreciated.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Understand
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
21) The capital budgeting decision process can be described as:
A) how a firm's day-to-day financial matters should be managed.
B) how a firm's assets should be financed.
C) determining which productive assets should be purchased.
D) involving purchase of short-term assets.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
7
, 22) Working capital management decisions help to determine:
A) how a firm's day-to-day financial matters should be managed.
B) how a firm's assets should be financed.
C) which productive assets should be purchased.
D) how to increase a company's profit.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
23) Capital budgeting decisions generally have the most effect on:
A) the asset portion of the balance sheet.
B) the short-term investment portion of the balance sheet.
C) the current liability portion of the balance sheet.
D) the retained earnings portion of the balance sheet.
Answer: A
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Analyze
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
24) A good capital budgeting decision is one in which the perceived benefits of the project are:
A) equal to the cost of the asset.
B) less than the cost of the asset.
C) more than the cost of the asset.
D) not identifiable.
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Strategic/Critical Thinking
8
Finance 6e Parrino
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
,Corporate Finance, 6e (Parrino)
Chapter 1 The Financial Manager and the Firm
1) What is the primary responsibility of a financial manager?
A) To make decisions that benefit the firm's suppliers
B) To make decisions in the best interest of the shareholders
C) To ensure that the firm minimizes taxes
D) To prioritize short-term profits over long-term growth
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: FSA / Process and Resource Management Perspectives
2) Which of the following is considered an intangible productive asset?
A) Manufacturing equipment
B) Cash
C) A patent
D) An office building
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
3) Which of the following accurately reflects the relationship between productive assets and cash
flows in a manufacturing firm?
A) Intangible assets typically account for the majority of cash flows generated by a
manufacturing firm.
B) Productive assets, including both tangible and intangible assets, are essential for generating
cash flows for a manufacturing firm.
C) The cash flows of a manufacturing firm are primarily derived from its operational expenses
rather than its assets.
D) Manufacturing firms rely solely on tangible assets to produce cash flows.
Answer: B
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
1
,4) To foster long-term growth, businesses should focus on which of the following strategies?
A) Reinvesting their cash flows or earnings back into the business.
B) Paying out all profits as dividends to shareholders.
C) Limiting investments to only high-risk ventures.
D) Minimizing reinvestment in new projects.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: FSA / Process and Resource Management Perspectives
5) In the event of bankruptcy, what is the likely process regarding a company's assets?
A) The assets are always liquidated without exception.
B) The company will only be reorganized, not liquidated.
C) The company may be reorganized or liquidated.
D) All assets will be distributed equally among owners and creditors.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Corporate Finance / Resource Management
6) What is a key characteristic of capital assets?
A) They are purchased primarily for resale within one year.
B) They are intended for long-term use in generating revenues.
C) They must be liquidated quickly to meet financial obligations.
D) They include only intangible assets.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
2
,7) In capital budgeting, what is the primary goal of investing in a project?
A) To ensure the project has a quick return on investment.
B) To guarantee that costs are minimized.
C) To maximize the value of the firm by ensuring benefits exceed costs.
D) To increase market share regardless of profitability.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Analyze
AACSB: Analytic
IMA / AICPA: Budget Preparation / Resource Management
8) Why is it important for a firm to carefully consider its mix of debt and equity?
A) It determines the number of employees the firm can hire.
B) It affects the firm's financing costs and potential bankruptcy risk.
C) It has no significant implications for the firm's operations.
D) It ensures that the firm remains privately owned.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Understand
AACSB: Analytic
IMA / AICPA: Investment Decisions / Strategic/Critical Thinking
9) If a firm has total current assets of $500,000 and total current liabilities of $300,000 and total
equity of $260,000, what is the firm's net working capital?
A) $200,000
B) $240,000
C) $800,000
D) $500,000
Answer: A
Explanation: $200,000 (Net working capital = Total Current Assets - Total Current Liabilities
= $500,000 - $300,000)
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
3
,10) To start a business, the owners need:
A) wealth.
B) a clear vision of what products or services they want to produce.
C) employees.
D) productive assets such as buildings, technology, or patents.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
11) A stakeholder is:
A) someone geographically close to the firm's headquarters.
B) someone who has a claim on the cash flows of the firm.
C) a business organization.
D) someone working for the competitor of the firm.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
12) If you have provided capital to a firm, then you are:
A) a manager.
B) a stakeholder.
C) a partner.
D) an employee.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
4
,13) Which of the following is NOT a stakeholder?
A) An employee
B) A lender
C) The IRS
D) The owner
Answer: D
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
14) A trademark is an example of:
A) a liquid asset.
B) an intangible asset.
C) a contingent asset.
D) a physical asset.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Business Economics / Global and Industry Perspectives
15) Which of the following is NOT a characteristic of a shareholder?
A) Expects to receive dividends
B) Expects to receive a capital gain on an investment
C) Expects to receive interest
D) Expects to have rights as defined in the corporation's charter and bylaws
Answer: D
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
5
,16) Which of the following is a basic source of funds for a firm?
A) Debt
B) Equity
C) Asset liquidations
D) Both A and B
Answer: D
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
17) The cash remaining with the firm after paying its operating expenses, making payments to
creditors, and taxes is called:
A) earnings per share.
B) capital contributed in excess of par.
C) residual cash flows.
D) assets.
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
18) Cash dividends are paid out of:
A) residual cash flows.
B) liquidated assets.
C) long-term debt.
D) payroll fund.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
6
,19) Current liabilities are liabilities that:
A) will be converted to cash within a year.
B) must be paid within a year.
C) will be converted to equity within a year.
D) are contingent depending upon a future outcome.
Answer: B
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
20) Current assets are assets that:
A) will be converted to cash within a year.
B) must be paid within a year.
C) will be converted to equity within a year.
D) must be depreciated.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Understand
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
21) The capital budgeting decision process can be described as:
A) how a firm's day-to-day financial matters should be managed.
B) how a firm's assets should be financed.
C) determining which productive assets should be purchased.
D) involving purchase of short-term assets.
Answer: C
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Apply
AACSB: Analytic
IMA / AICPA: Budget Preparation / Process and Resource Management Perspectives
7
, 22) Working capital management decisions help to determine:
A) how a firm's day-to-day financial matters should be managed.
B) how a firm's assets should be financed.
C) which productive assets should be purchased.
D) how to increase a company's profit.
Answer: A
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
23) Capital budgeting decisions generally have the most effect on:
A) the asset portion of the balance sheet.
B) the short-term investment portion of the balance sheet.
C) the current liability portion of the balance sheet.
D) the retained earnings portion of the balance sheet.
Answer: A
Diff: 2
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Analyze
AACSB: Analytic
IMA / AICPA: Corporate Finance / Process and Resource Management Perspectives
24) A good capital budgeting decision is one in which the perceived benefits of the project are:
A) equal to the cost of the asset.
B) less than the cost of the asset.
C) more than the cost of the asset.
D) not identifiable.
Answer: C
Diff: 1
Learning Objective: LO 1.1 Identify the key financial decisions facing the financial manager of
any business.
Section: 1.1 The Role of the Financial Manager
Bloom code: Remember
AACSB: Analytic
IMA / AICPA: Corporate Finance / Strategic/Critical Thinking
8
