,CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
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 OBJECT INTE.GENE.16.1 - LO: 1-2
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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 OBJECT INTE.GENE.16.1 - LO: 1-2
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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
Cengage Learning Testing, Powered by Cognero Page 1
,CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
LEARNING OBJECT INTE.GENE.16.1 - LO: 1-2
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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 OBJECT INTE.GENE.16.1 - LO: 1-2
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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 OBJECT INTE.GENE.16.1 - LO: 1-2
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited States - OH - Default City - TBA
:
TOPICS: Limited liability
KEYWORDS: Bloom’s: Knowledge
Cengage Learning Testing, Powered by Cognero Page 2
, CHAPTER 1—AN OVERVIEW OF FINANCIAL MANAGEMENT AND THE FINANCIAL
ENVIRONMENT
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 OBJECT INTE.GENE.16.2 - LO: 1-3
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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 OBJECT INTE.GENE.16.3 - LO: 1-4
IVES:
NATIONAL STANDA United States - BUSPROG: Reflective Thinking
RDS:
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 STANDARDSUnited 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
Cengage Learning Testing, Powered by Cognero Page 3
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