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1-1 Chapter 01 Introduction to Corporate Finance
True / False Questions
- In capital budgeting, the financial manager tries to identify investment opportunities that
are worth more to the firm than they cost to acquire.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- The size, timing and risk of cash flows are important when evaluating a capital budgeting
decision.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- A capital expenditure project becomes desirable when the project is worth more to the firm
than the cost to acquire it.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
(Fundamentals of Corporate Finance, 10th Canadian Edition, 10e Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts) (Test Bank, For Complete File, Download link at the end of this File) 1 / 4
Chapter 01 - Introduction to Corporate Finance 1-2
- A capital expenditure project becomes desirable when the value of the cash flow generated
by the project exceeds the project's cost.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Capital structure determines the least expensive sources of funds for the firm to borrow.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Capital structure determines how much debt the firm should have in relation to its level of
equity.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Capital structure determines the level of current assets that is required to maintain the firm's
operational level.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
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Chapter 01 - Introduction to Corporate Finance 1-3
- Capital structure determines how much risk is associated with the future cash flows of a
project.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Determining when a supplier should be paid is a capital structure decision.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Establishing the accounts receivable policies is a capital structure decision.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Determining the amount of money to borrow to finance a 10-year project is a capital
structure decision.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
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Chapter 01 - Introduction to Corporate Finance 1-4
- Deciding if a new project should be accepted is a working capital decision.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- When evaluating a project in which a firm might invest, the size but not the timing of the
cash flows is important.
FALSE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Working capital management addresses the firm's appropriate level of inventory.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 01-01 The basic types of financial management decisions and the role of the financial manager.
Topic: 01-04 Financial Management Decisions
- Common stockholders or limited partners can lose, at most, what they have invested in a
firm.
TRUE
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Medium
Learning Objective: 01-02 The financial implications of the different forms of business organization.
Topic: 01-07 Partnership
Topic: 01-08 Corporation
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