Test Bank For
Fundamentals of Corporate Finance 2024 Release 2025 By Stephen Ross, Randolph Westerfield
and Bradford Jordan
Chapter 1-21 Answers are at the End of Each Chapter
Chapter 1
Student name:__________
1) The controller, rather than the treasurer, is typically responsible for which one of the
following functions?
A) Depositing cash receipts
B) Processing cost reports
C) Analyzing equipment purchases
D) Approving credit for a customer
E) Paying a vendor
2) Usually, the financial planning manager of a corporation reports directly to the:
A) controller.
B) treasurer.
C) chief financial officer.
D) president.
E) chief executive officer.
3) In a typical corporate organizational structure:
A) the vice president of finance reports to the chair of the board.
B) the chief executive officer reports to the president.
C) the controller reports to the chief financial officer.
D) the treasurer reports to the president.
E) the chief operations officer reports to the vice president of production.
4) Which one of the following questions involves a capital budgeting decision?
A) How many shares of stock should the firm issue?
B) Should the firm purchase a new machine for the production line?
C) Should the firm borrow money to acquire new equipment?
D) How much inventory should the firm keep on hand?
E) How much money should be kept in the checking account?
,5) When evaluating the timing of a project’s projected cash flows, a financial manager is
analyzes:
A) the amount of each expected cash flow.
B) only the start-up costs that are expected to require cash resources.
C) only the date of the final cash flow related to the project.
D) the amount by which cash receipts are expected to exceed cash outflows.
E) when each cash flow is expected to occur.
6) Which one of the following questions involves a capital structure decision?
A) Which one of two project proposals should the firm implement?
B) How should the firm allocate its limited available funds among acceptable projects?
C) How much funding should be allocated to financing customer purchases of a new
product?
D) How much debt should the firm incur to fund a project?
E) How much inventory will be needed to support a project?
7) Determining the number of shares of stock to issue is an example of a _________ decision.
A) capital rationing
B) net working capital
C) capital budgeting
D) capital allocation
E) capital structure
8) Which one of the following questions is a working capital management decision?
A) When should the company issue new shares of stock to the public?
B) When should the company replace its fleet of delivery vehicles?
C) When is the right time to open a new store?
D) Should we offer credit terms to all customers or only certain customers?
E) From which lender should the firm borrow money to pay for a new building?
9) Which one of the following questions involves a working capital management decision?
A) What equipment will be required to complete a project?
B) Should the firm require immediate payment from customers or offer credit terms?
C) What amount of long-term debt is required to complete a project?
D) What percentage of the firm’s equity should the firm issue to fund an acquisition?
E) Which one of several acceptable projects should be implemented?
,10) Which one of the following questions involves a working capital management decision?
A) What is the maximum level of cash to be kept in the firm’s bank account?
B) What is the most efficient process for producing a product?
C) How many hours of overtime should manufacturing employees be allowed to work?
D) When is the appropriate time to replace the delivery fleet?
E) Should a newly available parcel of land be acquired?
11) Deciding which long-term investment a firm should make is a _________ decision.
A) working capital management
B) capital constraints
C) cost of capital
D) capital budgeting
E) capital structure
12) A firm’s mixture of debt and equity financing is the result of its _________ decisions.
A) working capital management
B) cash management
C) cost analysis
D) capital budgeting
E) capital structure
13) A firm’s _________ balance reflects the firm’s mix of short-term assets and short-term
liabilities.
A) net working capital
B) net debt
C) investment capital
D) net currency
E) capital structure
14) Which one of the following questions is least likely to be addressed by financial managers?
A) In which region of the country should a new product be launched?
B) Should customers be given 30 or 45 days to pay for their credit purchases?
C) Should the firm pay off its debt early?
D) Should the firm acquire new equipment?
E) How much cash should the firm keep on hand?
, 15) A firm owned by a single person who has unlimited liability for the firm's debts is called a:
A) corporation.
B) sole proprietorship.
C) general partnership.
D) limited partnership.
E) limited liability company.
16) A firm owned by two or more people who each have unlimited liability for the firm's debts is
called a:
A) corporation.
B) sole proprietorship.
C) general partnership.
D) limited partnership.
E) limited liability company.
17) A particular partner in a firm knows that the maximum financial loss he or she could
experience is the amount he or she invested in the firm. The partner is called a _________
partner.
A) general
B) sole
C) limited
D) corporate
E) zero
18) A business that is a legal entity separate from the owners, yet is treated as a legal person, is
called a(n):
A) corporation.
B) sole proprietorship.
C) general partnership.
D) limited partnership.
E) unlimited liability company.
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