Test Bank for Foundations of Financial Management, 18th Edition by Stanley Block
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Course
Financial management
Institution
Financial Management
Test Bank for Foundations of Financial Management 18e 18th Edition by Stanley Block, Geoffrey Hirt and Bartley Danielsen . Full Chapters test bank are included - Chapter 1 to 21
PART 1 INTRODUCTION
1 The Goals and Activities of Financial Management
PART 2 FINANCIAL ANALYSIS AND PLANNING
2 Rev...
Chap 01 18e
1) Which of the following did not contribute to the financial crisis?
A) Solid credit ratings from the ratings agencies
B) The extension of credit to high-risk borrowers
C) The merger of JPMorgan Chase and Bear Stearns
D) All of the options contributed to the financial crisis.
2) Credit default swaps are
A) an insurance product designed to protect financial institutions from customers who
default on their loans.
B) securities with a maturity of less than one year.
C) the result of a leveling off or slowing down of stock price increases.
D) market trades in previously issued securities.
3) What should be the primary goal of financial management?
A) Increased earnings
B) Maximizing cash flow
C) Maximizing shareholder wealth
D) Minimizing risk of the firm
4) In the past, the study of finance has included
A) mergers and acquisitions.
B) raising capital.
C) bankruptcy.
D) All of the options
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,5) Professor Merton Miller received the Nobel Prize in Economics for his work on
A) dividend policy.
B) investment theory.
C) working capital management.
D) capital structure theory.
6) Professors Harry Markowitz and William Sharpe received their Nobel Prize in
Economics for their contributions to the
A) options pricing model.
B) theories of working capital management.
C) theories of portfolio based management and the risk along with return on securities.
D) theories of international capital budgeting.
7) Behavioral finance is the study of
A) how investors react to accounting-based profit fluctuations.
B) how investors react to interest rates and foreign currency fluctuations.
C) how investors react to certain ways to diversify a portfolio.
D) how investors react to the amount of risk versus the amount of return in securities.
8) Which of the following is NOT addressed by the Dodd-Frank Act?
A) Liquidation of non-bank financial companies such as insurance companies.
B) Identifies systematic risk of U.S. financial system.
C) Written certifications of financial statements by the CEO and CFO.
D) Registration of hedge funds with the SEC.
2
,9) Proper risk-return management means that
A) the firm should take as few risks as possible.
B) the firm must determine an appropriate trade-off between risk and return.
C) the firm should earn the highest return possible.
D) the firm should value future profits more highly than current profits.
10) One of the major disadvantages of a sole proprietorship is
A) that there is unlimited liability to the owner.
B) the simplicity of decision making.
C) high organizational costs.
D) high operating costs.
11) One of the major advantages of a sole proprietorship is
A) that the owner has limited liability.
B) that stock in the proprietorship can be easily transferred.
C) that it is exempt from many tax rules that would otherwise apply when employees are
hired by the firm.
D) low operating costs.
12) The partnership form of an organization
A) avoids the double taxation of earnings and dividends found in the corporate form of
organization.
B) usually provides limited liability to the partners.
C) has unlimited life.
D) simplifies decision making.
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, 13) A corporation is
A) owned by stockholders who enjoy the privilege of limited liability.
B) easily divisible between owners.
C) a separate legal entity with unlimited life.
D) All of the options are correct.
14) With an S corporation
A) income is taxed as direct income to stockholders.
B) stockholders have the same liability as members of a partnership.
C) the number of stockholders is unlimited.
D) the life of the corporation is limited.
15) An S corporation
A) is similar to a partnership in that it carries unlimited liability.
B) is a separate legal entity that is treated like a normal corporation.
C) has all the organizational benefits of a corporation and its income is only taxed once.
D) All of the options
16) From the 2017 Tax Cuts and Job Act, a reason to choose sole proprietorship, partnership
or corporation as a form of organization is:
A) the number of people in the organization.
B) the liability of the owner.
C) the complexity involved with state and federal regulations and taxation.
D) All of the options are correct.
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