Corporate Finance Study Set 5

Business

Quiz 1 :
Goals and Governance of the Corporation

Quiz 1 :
Goals and Governance of the Corporation

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Capital budgeting decisions are used to determine how to raise the cash necessary for investments.
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True False
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False

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A successful investment is one that increases the value of the firm.
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True False
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True

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BP's committing of$500 million to partnership with University of California-Berkeley to develop new sources of energy is a capital budgeting decision.
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True False
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True

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Making good investment and financing decisions is the chieftask of the financial manager.
True False
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If a project's value is less than its required investment,then the project is attractive financially.
True False
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Pfizer's spending of $7.6 billion in 2006 on research and development of new drugs is a capital budgeting decision but not a financing decision.
True False
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LVMH's issuance ofa 7-year bond in 2005,raising 600 million euros,is a financing decision.
True False
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Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce.
True False
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Real assets can be intangible assets.
True False
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An IOU ("I owe you")from your brother-in-law is a financial asset.
True False
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The liability of sole proprietors is limited to the amount of their investment in the company.
True False
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General partners have limited personal liability for business debts in a limited partnership.
True False
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The separation of ownership and management is one distinctive feature of corporations.
True False
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A major disadvantage of partnerships is that they have double taxation of profits.
True False
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Boards of directors are often portrayed as active supporters of top management.
True False
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The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.
True False
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While control of large public companies in the United States is exercised through the board of directors and pressure from the stock market,in many other countries the stock market is less important and control shifts to major stockholders,typically banks and other companies.
True False
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Financial analysts are involved in monitoring and controlling the risk associated with investment projects and financing decisions.
True False
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The primary goal of any company should be to maximize current period profits.
True False
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Maximizing profits is the same as maximizing the value of the firm.
True False
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