Test Bank for Fundamentals of Corporate Finance, 8th Canadian Edition by Richard A. Brealey
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Course
Corporate Finance
Institution
Corporate Finance
Test Bank for Fundamentals of Corporate Finance 8ce 8th Canadian Edition by Richard A. Brealey, Stewart C. Myers, Alan J. Marcus, Devashis Mitra, Dinesh Gajurel. Full Chapters test bank are included with answers (Chapter 1 to 26)
Part One: Introduction
Chapter 1 Goals and Governance of the Firm...
All Chapters ✅
Chap 01 8ce Brealey Answers Included ✅
1) To obtain the necessary money a company sells financial assets or securities.
⊚ true
⊚ false
2) The liability of sole proprietors is limited to the amount of their investment in the company.
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⊚ false
3) General partners have limited personal liability for business debts in a limited partnership.
⊚ true
⊚ false
4) The corporate form of business organization is often accompanied by separation of
ownership and management.
⊚ true
⊚ false
5) A major disadvantage of partnerships is that they have "double taxation" of profits.
⊚ true
⊚ false
6) Capital budgeting decisions are used to determine how to raise the cash necessary for
investments.
⊚ true
⊚ false
7) As your firm grows, you may decide to form a corporation. You may incorporate your firm
federally, under the Canadian Business Corporation Act, or provincially, under the relevant
provincial laws.
⊚ true
⊚ false
1
,8) The duties of a corporate controller typically include the preparation of financial statements.
⊚ true
⊚ false
9) A successful investment is one that increases the value of the firm.
⊚ true
⊚ false
10) The primary goal of any company should be to maximize current period profit.
⊚ true
⊚ false
11) Ethical decision making in business can be viewed as a long-term investment in reputation.
⊚ true
⊚ false
12) Agency problems act as a hindrance to the goal of maximizing firm value.
⊚ true
⊚ false
13) If employee compensation plans are not designed properly, they can create incentives for
errant behaviour by management.
⊚ true
⊚ false
14) Poorly performing companies are also more likely to be taken over by another firm. After the
takeover, the old management team may find itself out on the street.
⊚ true
⊚ false
2
,15) Managers are subject to the scrutiny of specialists. Their actions are monitored by the
security analyst who advises investors to buy, hold, or sell the company's shares.
⊚ true
⊚ false
16) The agency problem is mitigated in practice through several devices.
⊚ true
⊚ false
17) In some ways the financing decision is less important than the investment decision.
⊚ true
⊚ false
18) Which of the following represents a financing decision?
A) a decision to borrow $10 million through a bank loan.
B) a decision to invest in the common stock of another corporation.
C) a decision to buy a new mainframe computer.
D) a decision to pay $1 million of accounts payable.
19) For small firms, shareholders and management may be one and the same. But for large
companies, separation of ownership and management is:
A) a practical necessity.
B) not a necessity.
C) a liability.
D) a fraudulent move.
20) Which of the following would not be considered a real asset?
A) a corporate bond
B) a machine
C) a patent
D) a factory
3
, 21) Which of the following would be considered an advantage of the sole proprietorship form of
organization?
A) Wide access to capital markets
B) Unlimited liability
C) A pool of expertise
D) Profits taxed at only one level
22) Sole proprietorships resolve the issue of agency problems by:
A) avoiding excessive expense accounts.
B) discharging those who violate the rules.
C) allowing owners to share the cost of their actions with others.
D) forcing owners to bear the full cost of their actions.
23) When managers' compensation plans are tied in a meaningful manner to the profits of the
firm, agency problems:
A) can be reduced.
B) will be created.
C) are shifted to other stakeholders.
D) are eliminated entirely from the firm.
24) In a firm having both a treasurer and a controller, which of the following would most likely
be handled by the controller?
A) Internal auditing
B) Credit management
C) Banking relationships
D) Insurance
25) Which of the following is not an advantage to incorporating a business?
A) Easier access to financial markets.
B) Limited liability.
C) Becoming a permanent legal entity.
D) Profits taxed at the corporate level and the shareholder level.
4
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