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Testbank to accompany Fundamentals of Corporate Finance 2 nd
edition (Australia) 1 / 4
© John Wiley & Sons Australia, Ltd 2013 1.2 Chapter 1 – The financial manager and the company
True/False
- The financial manager is responsible for making decisions that are in the best interest of
the company's owners.
*a. True
- False
Correct answer: a
- The local Liberal Party is a stakeholder in a local company that makes no political
donations to either party.
- True
*b. False
Correct answer: b
- A patent is a productive asset for a technology-based company.
*a. True
- False
Correct answer: a
- Intangible assets generate most of a company's cash flows.
- True
*b. False
Correct answer: b
- The most fundamental way that a business can grow in size is from the reinvestment of
cash flows or earnings.
*a. True
- False
Correct answer: a 2 / 4
Testbank to accompany Fundamentals of Corporate Finance 2e © John Wiley & Sons Australia, Ltd 2013 1.3
- When insolvency occurs, the company will always be liquidated.
- True
*b. False
Correct answer: b
- Capital assets are generally short term in nature.
- True
*b. False
Correct answer: b
- A good capital budgeting decision is one in which the benefits are worth more to the
company than the cost of the asset.
*a. True
- False
Correct answer: a
- The financing decision determines how companies raise cash to pay for their investments.
*a. True
- False
Correct answer: a
- The dollar difference between current assets and liabilities is called working capital.
- True
*b. False
Correct answer: b
- A sole proprietorship is an owner's only business.
- True
*b. False
Correct answer: b 3 / 4
Chapter 1: The financial manager and the company
© John Wiley & Sons Australia, Ltd 2013 1.4
- The greatest number of businesses in Australia are companies.
- True
*b. False
Correct answer: b
- Unlimited liability means that the owner of a company is responsible for paying all the
company's bills.
*a. True
- False
Correct answer: a
- The process of transferring ownership of a sole proprietorship is relatively easy.
- True
*b. False
Correct answer: b
- General partners in a business have limited liability with regard to their company's
obligations.
- True
*b. False
Correct answer: b
- Most large companies are incorporated in New South Wales because of its favourable tax
treatment of corporate income and its laws protecting the rights of its owners.
- True
*b. False
Correct answer: b
- / 4
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