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1-1 Chapter 01 Goals and Governance of the Firm True / False Questions 1.To obtain the necessary money a company sells financial assets or securities.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-02 Distinguish between real and financial assets.
Topic: 01-03 The Financing Decision
2.The liability of sole proprietors is limited to the amount of their investment in the company.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-03 Cite some of the advantages and disadvantages of organizing a business as a corporation.
Topic: 01-06 Sole Proprietorships
3.General partners have limited personal liability for business debts in a limited partnership.
FALSE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-03 Cite some of the advantages and disadvantages of organizing a business as a corporation.
Topic: 01-07 Partnerships
Fundamentals of Corporate Finance, 7th Canadian Edition, By Brealey, Myers, Marcus, Mitra, Gajurel (Test Bank All Chapters) 1 / 4
Chapter 01 - Goals and Governance of the Firm 1-2
- The corporate form of business organization is often accompanied by separation of
ownership and management.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-03 Cite some of the advantages and disadvantages of organizing a business as a corporation.
Topic: 01-04 What Is a Corporation?
- A major disadvantage of partnerships is that they have "double taxation" of profits.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-03 Cite some of the advantages and disadvantages of organizing a business as a corporation.
Topic: 01-07 Partnerships
- Capital budgeting decisions are used to determine how to raise the cash necessary for
investments.
FALSE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-01 Give examples of the investment and financing decisions that financial managers make.
Learning Objective: 01-02 Distinguish between real and financial assets.
Topic: 01-02 The Investment (Capital Budgeting) Decision
- As your firm grows, you may decide to form a corporation. You may incorporate your firm
federally, under the Canadian Business Corporation Act, or provincially, under the relevant provincial laws.
TRUE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-03 Cite some of the advantages and disadvantages of organizing a business as a corporation.
Topic: 01-04 What Is a Corporation?
- / 4
Chapter 01 - Goals and Governance of the Firm 1-3
- The duties of a corporate controller typically include the preparation of financial
statements.
TRUE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-04 Describe the responsibilities of the CFO, the treasurer, and the controller.
Topic: 01-09 Who Is the Financial Manager?
- A successful investment is one that increases the value of the firm.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-10 Goals of the Corporation
- The primary goal of any company should be to maximize current period profit.
FALSE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-10 Goals of the Corporation
- Maximizing profits is the same as maximizing the value of the firm.
FALSE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-10 Goals of the Corporation
- / 4
Chapter 01 - Goals and Governance of the Firm 1-4
- Ethical decision making in business can be viewed as a long-term investment in
reputation.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-14 Ethical Disputes
- Agency problems act as a hindrance to the goal of maximizing firm value.
TRUE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-12 Agency Problems, Executive Compensation, and Corporate Governance
- Managers are spurred on by incentive schemes that provide big returns if shareholders
gain but are valueless if they do not.
TRUE
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 01-05 Explain why maximizing market value is the logical financial goal of the corporation.Learning Objective: 01-06 Explain why value maximization is usually consistent with ethical behaviour.Learning Objective: 01-07 Explain how corporations mitigate conflicts and encourage cooperative behaviour.
Topic: 01-12 Agency Problems, Executive Compensation, and Corporate Governance
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