TEST BANK FOR INTERMEDIATE FINANCIAL
MANAGEMENT 12TH EDITION BY EUGENE F BRIGHAM
PHILLIP R DAVES CHAPTER 1-32 A+
1. The form of organization for a business is not an important issue, as this decision has
very little effect on the income and wealth of the firm's owners.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge
2. 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
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
A+ Page 1
,Created By: A Solution
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge
3. 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
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Partnership
KEYWORDS: Bloom’s: Knowledge
4. 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
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
A+ Page 2
,Created By: A Solution
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Proprietorship
KEYWORDS: Bloom’s: Knowledge
5. One key value of limited liability is that it lowers owners' risks and thereby enhances a
firm's value.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Limited liability
KEYWORDS: Bloom’s: Knowledge
6. 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
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.2 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
A+ Page 3
, Created By: A Solution
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Value maximization
KEYWORDS: Bloom’s: Knowledge
7. 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
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Easy
LEARNING OBJECTIVES: INTE.GENE.16.3 - LO: 1-4
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
STATE STANDARDS: United States - AK - DISC: Goals of the firm, role of - DISC:
Goals of the firm, role of finance, and analysis of public information
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Financial intermediaries
KEYWORDS: Bloom’s: Knowledge
8. 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
ANSWER: False
POINTS: 1
DIFFICULTY: Difficulty: Moderate
LEARNING OBJECTIVES: INTE.GENE.16.1 - LO: 1-2
A+ Page 4
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