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1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Fundamentals of Corporate Finance, 12e (Ross) Chapter 1 Introduction to Corporate Finance
1) Which one of the following functions should be the responsibility of the controller rather than the treasurer?
- Depositing cash receipts
- Processing cost reports
- Analyzing equipment purchases
- Approving credit for a customer
- Paying a vendor
Answer: B
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) The treasurer of a corporation generally reports directly to the:
- board of directors.
- chairman of the board.
- chief executive officer.
- president.
- vice president of finance.
Answer: E
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
(Fundamentals of Corporate Finance, 12e Stephen Ross, Randolph Westerfield, Bradford Jordan) (Test Bank all Chapters) 1 / 4
2 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 correctly defines the upward chain of command in a typical corporate organizational structure?
- The vice president of finance reports to the chairman of the board.
- The chief executive officer reports to the president.
- The controller reports to the chief financial officer.
- The treasurer reports to the president.
- The chief operations officer reports to the vice president of production.
Answer: C
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) An example of a capital budgeting decision is deciding:
- how many shares of stock to issue.
- whether or not to purchase a new machine for the production line.
- how to refinance a debt issue that is maturing.
- how much inventory to keep on hand.
- how much money should be kept in the checking account.
Answer: B
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.5) When evaluating the timing of a project's projected cash flows, a financial manager is
analyzing:
- the amount of each expected cash flow.
- only the start-up costs that are expected to require cash resources.
- only the date of the final cash flow related to the project.
- the amount by which cash receipts are expected to exceed cash outflows.
- when each cash flow is expected to occur.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Capital structure decisions include determining:
- which one of two projects to accept.
- how to allocate investment funds to multiple projects.
- the amount of funds needed to finance customer purchases of a new product.
- how much debt should be assumed to fund a project.
- how much inventory will be needed to support a project.
Answer: D
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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4 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
7) The decision to issue additional shares of stock is an example of:
- working capital management.
- a net working capital decision.
- capital budgeting.
- a controller's duties.
- a capital structure decision.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Which one of the following questions is a working capital management decision?
- Should the company issue new shares of stock or borrow money?
- Should the company update or replace its older equipment?
- How much inventory should be on hand for immediate sale?
- Should the company close one of its current stores?
- How much should the company borrow to buy a new building?
Answer: C
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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