Test bank for Fundamentals of Corporate Finance 10th Canadian Edition by Ross
... [Show More] Westerfield
Chapter 01 Introduction to Corporate Finance
True / False Questions
1. In capital budgeting, the financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.
2. The size, timing and risk of cash flows are important when evaluating a capital budgeting decision.
3. A capital expenditure project becomes desirable when the project is worth more to the firm than the cost to acquire it.
4. A capital expenditure project becomes desirable when the value of the cash flow generated by the project exceeds the project's cost.
5. Capital structure determines the least expensive sources of funds for the firm to borrow.
6. Capital structure determines how much debt the firm should have in relation to its level of equity.
7. Capital structure determines the level of current assets that is required to maintain the firm's operational level.
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8. Capital structure determines how much risk is associated with the future cash flows of a project.
9. Determining when a supplier should be paid is a capital structure decision.
10. Establishing the accounts receivable policies is a capital structure decision.
11. Determining the amount of money to borrow to finance a 10-year project is a capital structure decision.
12. Deciding if a new project should be accepted is a working capital decision.
13. When evaluating a project in which a firm might invest, the size but not the timing of the cash flows is important.
14. Working capital management addresses the firm's appropriate level of inventory.
15. Common stockholders or limited partners can lose, at most, what they have invested in a firm.
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16. Partnership income is treated as personal income of the partners.
17. A limited partner can lose his or her investment in the partnership.
18. Maximization of the current earnings of the firm is the main goal of the financial manager.
19. The primary goal of a financial manager should be to maximize the value of shares issued to new investors in the corporation.
20. The primary goal of financial management is to minimize the corporate tax liability.
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