Fundamentals of Corporate Finance, 12e (Ross)
Chapter 1 Introduction to Corporate Finance
1) Which one of the following functions should be the responsibility of the controller
rather than the treasurer?
A) Depositing cash receipts
B) Processing cost reports
C) Analyzing equipment purchases
D) Approving credit for a customer
E) Paying a vendor
Answer: B
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) The treasurer of a corporation generally reports directly to the:
A) board of directors.
B) chairman of the board.
C) chief executive officer.
D) president.
E) vice president of finance.
Answer: E
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
,3) Which one of the following correctly defines the upward chain of command in a
typical corporate organizational structure?
A) The vice president of finance reports to the chairman 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.
Answer: C
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) An example of a capital budgeting decision is deciding:
A) how many shares of stock to issue.
B) whether or not to purchase a new machine for the production line.
C) how to refinance a debt issue that is maturing.
D) how much inventory to keep on hand.
E) how much money should be kept in the checking account.
Answer: B
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
,5) When evaluating the timing of a project's projected cash flows, a financial manager is
analyzing:
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.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Capital structure decisions include determining:
A) which one of two projects to accept.
B) how to allocate investment funds to multiple projects.
C) the amount of funds needed to finance customer purchases of a new product.
D) how much debt should be assumed to fund a project.
E) how much inventory will be needed to support a project.
Answer: D
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
, 7) The decision to issue additional shares of stock is an example of:
A) working capital management.
B) a net working capital decision.
C) capital budgeting.
D) a controller's duties.
E) a capital structure decision.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Which one of the following questions is a working capital management decision?
A) Should the company issue new shares of stock or borrow money?
B) Should the company update or replace its older equipment?
C) How much inventory should be on hand for immediate sale?
D) Should the company close one of its current stores?
E) How much should the company borrow to buy a new building?
Answer: C
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Chapter 1 Introduction to Corporate Finance
1) Which one of the following functions should be the responsibility of the controller
rather than the treasurer?
A) Depositing cash receipts
B) Processing cost reports
C) Analyzing equipment purchases
D) Approving credit for a customer
E) Paying a vendor
Answer: B
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) The treasurer of a corporation generally reports directly to the:
A) board of directors.
B) chairman of the board.
C) chief executive officer.
D) president.
E) vice president of finance.
Answer: E
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
,3) Which one of the following correctly defines the upward chain of command in a
typical corporate organizational structure?
A) The vice president of finance reports to the chairman 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.
Answer: C
Difficulty: 1 Easy
Topic: Management organization and roles
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) An example of a capital budgeting decision is deciding:
A) how many shares of stock to issue.
B) whether or not to purchase a new machine for the production line.
C) how to refinance a debt issue that is maturing.
D) how much inventory to keep on hand.
E) how much money should be kept in the checking account.
Answer: B
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
,5) When evaluating the timing of a project's projected cash flows, a financial manager is
analyzing:
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.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) Capital structure decisions include determining:
A) which one of two projects to accept.
B) how to allocate investment funds to multiple projects.
C) the amount of funds needed to finance customer purchases of a new product.
D) how much debt should be assumed to fund a project.
E) how much inventory will be needed to support a project.
Answer: D
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
, 7) The decision to issue additional shares of stock is an example of:
A) working capital management.
B) a net working capital decision.
C) capital budgeting.
D) a controller's duties.
E) a capital structure decision.
Answer: E
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
8) Which one of the following questions is a working capital management decision?
A) Should the company issue new shares of stock or borrow money?
B) Should the company update or replace its older equipment?
C) How much inventory should be on hand for immediate sale?
D) Should the company close one of its current stores?
E) How much should the company borrow to buy a new building?
Answer: C
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 Define the basic types of financial management decisions and
the role of the financial manager.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
