TEST BANK for Corporate Finance: A Focused Approach 7th Edition by Michael Ehrhardt and Eugene Brigham. TABLE OF CONTENTS: PART I: FUNDAMENTAL CONCEPTS OF CORPORATE FINANCE. 1. An Overview of Financial Management and the Financial Environment. Web Extensions 1A: An Overview of Derivatives; 1B: A C...
,Chapter 01: 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
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
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
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Firm organization
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
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
Copyright Cengage Learning. Powered by Cognero. Page 1
,Chapter 01: An Overview of Financial Management and the Financial Environment
DIFFICULTY: Difficulty: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Partnership
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
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
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Proprietorship
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
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
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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
Copyright Cengage Learning. Powered by Cognero. Page 2
, Chapter 01: An Overview of Financial Management and the Financial Environment
LOCAL STANDARDS: United States - OH - Default City - TBA
TOPICS: Limited liability
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
6. 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
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Partnership
KEYWORDS: Bloom’s: Comprehension
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
7. The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively
formed, are two key advantages to that form of business.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficulty: Moderate
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: FMTP.EHRH.20.01.03 - LO: 1-3
NATIONAL STANDARDS: United States - BUSPROG: Reflective Thinking
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 STANDARDS: United States - OH - Default City - TBA
TOPICS: Proprietorship
KEYWORDS: Bloom’s: Comprehension
DATE CREATED: 10/31/2018 8:20 AM
DATE MODIFIED: 10/31/2018 8:20 AM
Copyright Cengage Learning. Powered by Cognero. Page 3
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AcademiContent. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $34.93. You're not tied to anything after your purchase.
