CHAPTER 01AN OVERVIEW OF FINANCIAL MANAGEMENT

Essentials of Financial Management 4th Asia- Pacific Edition, Brigham, Joel Houston, Jun-Ming Hsu, Yoon Kee Kong, Bany-Ariffin

(Test Bank all Chapter)

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CHAPTER 01—AN OVERVIEW OF FINANCIAL MANAGEMENT

Cengage Learning Testing, Powered by Cognero Page 1

Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are used in multiple-choice questions.

Multiple Choice: True/False

• In most corporations, the CFO ranks under the CEO.
• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-1 What Is Finance?

TOPICS: Role of finance

KEYWORDS: Bloom’s: Knowledge

• The Chairman of the Board must also be the CEO.
• True
• False

ANSWER: False

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-1 What Is Finance?

TOPICS: Role of finance

KEYWORDS: Bloom’s: Knowledge

• The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking

individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person.

• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-1 What Is Finance?

TOPICS: Role of finance

KEYWORDS: Bloom’s: Knowledge

• Partnerships and proprietorships generally have a tax advantage over corporations.
• True
• False

ANSWER: True

POINTS: 1 2 / 4

CHAPTER 01—AN OVERVIEW OF FINANCIAL MANAGEMENT

Cengage Learning Testing, Powered by Cognero Page 2

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal

liabilities in the event of bankruptcy than are investors in a typical partnership.

• True
• False

ANSWER: False

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• An advantage of the corporate form of organization is that corporations are generally less highly regulated than

proprietorships and partnerships.

• True
• False

ANSWER: False

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• Some partners in a partnership may have different rights, privileges, and responsibilities than other partners.
• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• One advantage of the corporate form of organization is that it avoids double taxation.
• True
• False

ANSWER: False

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization 3 / 4

CHAPTER 01—AN OVERVIEW OF FINANCIAL MANAGEMENT

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KEYWORDS: Bloom’s: Knowledge

• It is generally harder to transfer one's ownership interest in a partnership than in a corporation.
• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt.

This problem would be avoided if you formed a corporation to operate the business.

• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• If a corporation elects to be taxed as an S corporation, then it can avoid the corporate tax. However, its stockholders

will have to pay personal taxes on the firm's net income.

• True
• False

ANSWER: True

POINTS: 1

DIFFICULTY: EASY

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all Federal taxes.

This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.

• True
• False

ANSWER: False

POINTS: 1

DIFFICULTY: EASY

REFERENCES: 1-3 Forms of Business Organization

TOPICS: Forms of organization

KEYWORDS: Bloom’s: Knowledge

• It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive

legal documents are required.

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