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Test Bank for Corporate Finance, 8th Edition by Ehrhardt Brigham

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  • Course
  • Corporate Finance
  • Institution
  • Corporate Finance

Test Bank for Corporate Finance: A Focused Approach 8th Edition 8e by Michael C. Ehrhardt; Eugene F. Brigham. ISBN 4638 Full Chapters test bank included Chapter 1: An Overview of Financial Management and the Financial Environment 1-1 The Five-Minute MBA 1-2 Finance From 40,000 Feet Above 1...

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  • July 10, 2023
  • 419
  • 2022/2023
  • Exam (elaborations)
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  • Corporate Finance
  • Corporate Finance

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Name: Class: Date:

Chapter 01 8e

Indicate whether the statement is true or false.
1. The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively
formed, are two key advantages to that form of business.
a. True
b. False

2. If Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other
firms or individuals, Firm A is a financial intermediary.
a. True
b. False

3. The disadvantages associated with a proprietorship are similar to those under a partnership. One exception
relates to the more formal nature of the partnership agreement and the commitment of all partners' personal
assets. As a result, partnerships do not have difficulty raising large amounts of capital.
a. True
b. False

4. There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the
organization, and (3) difficulty of transferring ownership. These combine to make it difficult for partnerships to
attract large amounts of capital and thus to grow to a very large size.
a. True
b. False

5. The major advantage of a regular partnership or a corporation as a form of business organization is the fact that
both offer their owners limited liability, whereas proprietorships do not.
a. True
b. False

6. Two disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's
unlimited personal liability for the business' debts.
a. True
b. False

7. Debt is a less risky than equity because a debtholder's claim has priority to an equity holder's claim.
a. True
b. False

8. If a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common
stock and thus shareholders' wealth.
a. True
b. False




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