TEST BANK
Test Bank for Foundations of Financial Management
17th Edition
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TEST BANK
,Stanley Block, Geoffrey Hirt & Bartley Danielsen: Foundations of
Financial Management
Chapter 1: The Goals and Activities of Financial Management
1) As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Inflation is assumed to be a temporary problem that does not affect financial decisions.
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Answer: FALSE
Difficulty: 1 Easy
Topic: Financial management decisions
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
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Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
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3) Financial capital is composed of long-term plant and equipment, as well as other tangible
investments.
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Answer: FALSE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) Real capital is composed of long-term plant and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
,AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
5) During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, the reorganization of financially troubled corporations, and bankruptcy.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) In the mid 1950s, finance began to change to a more analytical, decision-oriented approach.
Answer: TRUE
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Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
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Accessibility: Keyboard Navigation
7) Recently, the emphasis of financial management has been on the relationship between risk and
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return.
Answer: TRUE
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Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.; 01-03 The relationship of risk to return is a central focus of finance.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) The first Nobel Prizes given to finance professors were for their contributions to capital
structure theory and portfolio theories of risk and return.
Answer: TRUE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
, AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
9) How investors handle risk is an important topic that usually only economists observe.
Answer: FALSE
Explanation: Behavioral finance is something that the finance industry puts heavy emphasis on.
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
10) Mortgage-backed securities were devalued by accounting standards because of the high credit
ratings (AAA).
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Answer: FALSE
Explanation: These securities were devalued because borrowers defaulted on their loans and
didn't have the financial means to back up their loans in other ways.
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
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and a number of other areas.
Bloom's: Remember
AACSB: Reflective Thinking
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Accessibility: Keyboard Navigation
11) "Credit default swaps" are one of several tools that Congress and the President of the United
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States have jointly developed to ease the financial crisis that began in 2008.
Answer: FALSE
Difficulty: 1 Easy
Topic: Introduction to corporate finance
Learning Objective: 01-01 The field of finance integrates concepts from economics, accounting,
and a number of other areas.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
