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Test Bank for Foundations of Finance, 10e (Keown/Martin/Petty) Latest & Updated 2024
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Test Bank for Foundations of Finance, 10e(Keown/Martin/Petty) Latest & Updated
2024 A+
, Foundations of Finance, 10e (Keown/Martin/Petty)
Latest & Updated A+
Chapter 1 An Introduction to the Foundations of Financial Management
Learning Objective 1.1
1) Financial management deals with the maintenance and creation of economic value or
wealth. Answer: TRUE
Diff: 1 Page Ref: 3
Keywords: Financial Management Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
2) Each financial decision made by a corporate manager can be evaluated by its direct
impact on the corporation's stock price.
Answer: FALSE Diff: 1 Page Ref: 4
Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
3) The fundamental goal of a business is to maximize the retained earnings available to the
corporation's shareholders.
Answer: FALSE Diff: 1 Page Ref: 3
Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
,4) Shareholder wealth maximization means maximizing the price of the existing common
stock. Answer: TRUE
Diff: 1 Page Ref: 3
Keywords: Shareholder Wealth, Goal of the Firm Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
5) It is important to evaluate a corporate manager's financial decision by measuring the
effect the decision
should have on the corporation's stock price if everything else were held constant. Answer:
TRUE
Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Maximize Shareholder Wealth Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
6) Corporate managers should accept investment projects that maximize profits in the short
run because of the time value of money.
Answer: FALSE Diff: 2 Page Ref: 4
Keywords: Goal of the Firm, Profits, Time Value of Money Learning Obj.: L.O. 1.1
AACSB: Reflective Thinking
, 7) The goal of the firm's financial managers should be the maximization of the total value of
the firm's stock.
Answer: TRUE Diff: 1 Page Ref: 3
Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
8) The payment of a dividend to current shareholders will have no impact on a corporation's
share price because the cash paid is not available to future potential shareholders who may want
to buy the corporation's stock.
Answer: FALSE Diff: 1 Page Ref: 4
Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
9) One problem with maximization of shareholder wealth as a goal is that it ignores risk
taken by the firm's financial decisions.
Answer: FALSE Diff: 1 Page Ref: 4
Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective Thinking
10) The goal of profit maximization ignores the risk of financial decisions. Answer: FALSE
Diff: 1 Page Ref: 4 Keywords: Goal of the Firm Learning Obj.: L.O. 1.1 AACSB: Reflective
Thinking
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