tif_ch01 - Test Bank Chapter 1: Introduction and Overview...

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Test Bank Chapter 1: Introduction and Overview ESF I. True or False (Definitions and Concepts) T 1. The area of investments examines financial transactions from the viewpoint of investors outside the firm. T 2. Financial securities are contracts that provide for the exchange of money at various times. F 3. The balance sheet identity states that Total Assets equals Liabilities minus Stockholders’ Equity. (FALSE: Should be plus instead of minus.) F 4. Equity contains a legal obligation to repay borrowed money. (FALSE: Should be Debt instead of Equity.) T 5. The investment-vehicle model of the firm implies that managers should maximize shareholder wealth. F 6. In a partnership, a single individual owns all the firm’s assets directly and is directly responsible for all its liabilities. (FALSE: Should be sole proprietorship instead of partnership.) F 7. Limited liability means you can lose more than what you have paid for your ownership in a firm. (FALSE: Should be cannot lose instead of can lose.) T 8. Shareholder wealth maximization focuses the profit motive squarely on the owners. T 9. Ownership in a company, like the capital markets, goes beyond national boundaries. F 10. The field of finance is not influenced by major societal and economic needs of the time. (FALSE: Should be finance is influenced instead of finance is not influenced.) II. Multiple Choice (Definitions and Concepts) b 11. Finance is primarily concerned with determining . a. costs. b. value. c. profits. d. all of these d 12. There are three main areas of corporate finance. These include . a. corporate financial management. b. investments. c. financial markets and intermediaries. d. all of these b 13. Corporate financial management is best described as focusing on .: a. the asset side of the balance sheet.
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b. how a corporation can create and maintain value. c. maximizing sales. d. none of these are correct. a 14. The investment decision best addresses which of the following questions? a. Should we buy new equipment? b. Should debt be short-term? c. Should we borrow in a foreign currency? d. Should we increase our advertising budget? b 15. The financing decision best addresses which of the following questions? a. Should we buy this piece of land? b. Should we issue common stock or convertible debt? c. Should we increase our inventory? d. Should we give employees stock options? d 16. The managerial decision best addresses which of the following questions? a. How fast should we grow? b. What size of firm do we want? c. How should we compensate our managers? d. all of these a 17. Which of the following forms of ownership are purchased in the capital markets? a. stocks b. bank debt c. computer equipment d. all of these c 18. Financial intermediaries purchase financial securities in order to . a.
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This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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tif_ch01 - Test Bank Chapter 1: Introduction and Overview...

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