(Test Bank) Fundamentals Of Corporate Finance (Australia)

Ross,Westerfield,Jordan, 8

Business

Test Bank

8th Edition

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Test Bank for Fundamentals Of Corporate Finance (Australia), The downloadable file consists of 666 pages, and the total size of the file is 12.63 MB. Purchase now only for highly discounted price.

Author(s): Ross, Westerfield, Jordan

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© McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Chapter 01 Testbank (static) 1. Which one of the following functions should be the responsibility of the chief accountant rather than the corporate treasurer? A. Depositing cash receipts B. Processing cost reports C. Analysing equipment purchases D. Approving credit for a customer E. Paying a vendor 2. An example of a capital budgeting decision is deciding: A. how many company shares 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 bank account. 3. Which one of the following questions is a working capital management decision? A. Should the company issue new company shares 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? © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) 4. Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. Working capital management B. Cash management C. Cost analysis D. Capital budgeting E. Capital structure 5. A business owned by a solitary individual who has unlimited liability for the firm's debt is called a: A. company. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. 6. A business created as a distinct legal entity and treated as a legal 'person' is called a(n): A. company. B. sole proprietorship. C. general partnership. D. limited partnership. E. unlimited liability company. 7. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest? A. Only general partners B. Only sole proprietors C. All shareholders D. Both limited and general partners E. Both general partners and sole proprietors 8. A limited partnership: A. has an unlimited life. B. can opt to be taxed as a corporation. C. terminates at the death of any one limited partner. D. has at least one partner who has unlimited liability for all of the partnership’s debts. E. consists solely of limited partners. 9. Financial managers should primarily focus on the interests of: A. stakeholders. B. the vice president of finance. C. their immediate supervisor. D. shareholders. E. the board of directors. 10. Which one of the following best states the primary goal of financial management? A. Maximise current dividends per share B. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Maximise the current value per share C. Increase cash flow and avoid financial distress D. Minimise operational costs while maximising firm efficiency E. Maintain steady growth while increasing current profits 11. Which one of the following best illustra tes that the management of a firm is adhering to the goal of financial management? A. An increase in the amount of the quarterly dividend B. A decrease in the per unit production costs C. An increase in the number of shares outstanding D. A decrease in the net working capital E. An increase in the market value per share 12. Financial managers should strive to maximise the current value per company to: A. guarantee the company will grow in size at the maximum possible rate. B. increase employee salaries. C. best represent the interests of the current shareholders. D. increase the current dividends per share. E. provide managers with company shares as part of their compensation. 13. Which one of the following is least likely to help convince managers to work in the best interest of the shareholders? Assume there are no large severance packages upon exiting the f irm. A. Compensation based on the value of the company share B. Share option plans C. Threat of a company takeover © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) D. Threat of a proxy fight E. Increasing managers’ base salaries 14. Which one of the following is an agency cost? A. Accepting an investment opportunity that will add value to the firm B. Increasing the half -yearly dividend C. Investing in a new project that creates firm value D. Hiring independent accountants to audit the company’s financial statements E. Closing a divi sion of the firm that is operating at a loss 15. Which one of the following is a means by which shareholders can replace company management? A. Share options B. Promotion C. Business judgment rule D. Agency play E. Proxy fight 16. Which one of the foll owing parties has ultimate control of a corporation? A. Chairman of the board B. Board of directors C. Chief executive officer D. Chief financial officer E. Shareholders © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) 17. Which one of the following represents a cash outflow from a company? A. Issuance of new securities B. Payment of dividends C. New loan proceeds D. Receipt of tax refund E. Initial sale of ordinary shares 18. Which one of the following is a primary market transaction? A. Sale of currently outstanding company shares by a dealer to an individual investor B. Sale of a new company’s ordinary shares to an individual investor C. Share ownership transfer from one shareholder to another shareholder D. Gift of company share from one shareholder to another shareholder E. Gift of company share by a shareholder to a family member 19. Which one of the following statements is generally correct? A. Private placements in Australia must be registered with the Australian Securities and Investments Commission (ASIC). B. All secondary markets are auction markets. C. Dealer markets have a physical trading floor. D. Auction markets match buy and sell orders. E. Dealers arrange trades but never own the securities tra ded. 20. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Shareholder A sold a small number of ordinary shares of Maplewood Cabinets Ltd to Shareholder B. The shares are listed and only traded on the Australian Securities Exchange (ASX). This trade is most likely to have occurred in which one of the following mar kets? A. Primary, dealer market B. Secondary, dealer market C. Primary, auction market D. Secondary, auction market E. Secondary, over -the-counter (OTC) market © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Chapter 01 Testbank (static) Key 1. Which one of the following functions should be the responsibility of the chief accountant rather than the corporate treasurer? A. Depositing cash receipts B. Processing cost reports C. Analysing equipment purchases D. Approving credit for a customer E. Paying a vendor Ans: B AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -01 Define the basic types of financial management decisions and the role of the financial manager. Topic: Corporate finance and the financial manag er 2. An example of a capital budgeting decision is deciding: A. how many company shares 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 h and. E. how much money should be kept in the bank account. Ans: B AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -01 Define the basic types of financial management decisions and the role of the financial manager. Topic: Corporate finance and the financial manager 3. Which one of the following questions is a working capital management decision ? © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) A. Should the company issue new company shares 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? Ans: C AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -01 Define the basic types of financial manageme nt decisions and the role of the financial manager. Topic: Corporate finance and the financial manager 4. Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. Working capital management B. Cash management C. Cost analysis D. Capital budgeting E. Capital structure Ans: E AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -01 Define the basic types of financial management decisions and the role of the financial manager. Topic: Corporate finance and the financial manager 5. A business owned by a solitary individual who has unlimited liability for the firm's debt is called a: A. company. B. sole proprietorship. C. general partnership. D. limited partnership. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) E. limited liability company. Ans: B AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -03 Articulate the fi nancial implications of the different forms of business organisation. Topic: Forms of business organisation 6. A business created as a distinct legal entity and treated as a legal 'person' is called a(n): A. company. B. sole proprietorship. C. general p artnership. D. limited partnership. E. unlimited liability company. Ans: A AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -03 Articulate the financial implications of the different forms of business organisation. Topic: Forms of business organisation 7. Which of the following individuals have unlimited liability for a firm's debts based on their owner ship interest? A. Only general partners B. Only sole proprietors C. All shareholders D. Both limited and general partners E. Both general partners and sole proprietors Ans: E AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Object ive: 01 -03 Articulate the financial implications of the different forms of business organisation. Topic: Forms of business organisation © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) 8. A limited partnership: A. has an unlimited life. B. can opt to be taxed as a corporation. C. terminates at the dea th of any one limited partner. D. has at least one partner who has unlimited liability for all of the partnership’s debts. E. consists solely of limited partners. Ans: D AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -03 Articulate the financial implications of the different forms of business organisation. Topic: Forms of business organisation 9. Financial managers should primarily focus on the interests of: A. stakeholders. B. the vice preside nt of finance. C. their immediate supervisor. D. shareholders. E. the board of directors. Ans: D AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -02 Explain the goal of financial management. Topic: The goal of financ ial management 10. Which one of the following best states the primary goal of financial management? A. Maximise current dividends per share B. Maximise the current value per share C. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Increase cash flow and avoid financial distress D. Minimise operational costs while maximising firm efficiency E. Maintain steady growth while increasing current profits Ans: B AACSB: Reflective thinking Blooms: Knowledge Difficulty: Easy Learning Objectiv e: 01 -02 Explain the goal of financial management. Topic: The goal of financial management 11. Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management? A. An increase in the amount of the quarterly dividend B. A decrease in the per unit production costs C. An increase in the number of shares outstanding D. A decrease in the net working capital E. An increase in the market value per share Ans: E AACSB: Reflective thinking Blooms: Comprehens ion Difficulty: Easy Learning Objective: 01 -02 Explain the goal of financial management. Topic: The goal of financial management 12. Financial managers should strive to maximise the current value per company to: A. guarantee the company will grow in siz e at the maximum possible rate. B. increase employee salaries. C. best represent the interests of the current shareholders. D. increase the current dividends per share. E. provide managers with company shares as part of their compensation. Ans: C © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -02 Explain the goal of financial management. Topic: The goal of financial management 13. Which one of the following is least likely to help convince managers to work in the best interest of the shareholders? Assume there are no large severance packages upon exiting the firm. A. Compensation based on the value of the company share B. Share option plans C. Threat of a company takeover D. Threat of a proxy fight E. Increasing managers’ base salaries Ans: E AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Ob jective: 01 -04 Explain the conflicts of interest that can arise between managers and owners. Topic: The agency problem and control of the corporation 14. Which one of the following is an agency cost? A. Accepting an investment opportunity that will add value to the firm B. Increasing the half -yearly dividend C. Investing in a new project that creates firm value D. Hiring independent accountants to audit the company’s financial statements E. Closing a division of the firm that is operating at a loss Ans: D AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -04 Explain the conflict s of interest that can arise between managers and owners. Topic: The agency problem and control of the corporation 15. © McGraw -Hill Australia Ross, Fundamentals of Corporate Finance, 8e Chapter 01 Testbank (static) Which one of the following is a means by which shareholders can replace company management? A. Share options B. Promotion C. Business judgment rule D. Agency play E. Proxy fight Ans: E AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -04 Explain the conflicts of interest that can arise between managers and owners. Topic: The agency problem and contr ol of the corporation 16. Which one of the following parties has ultimate control of a corporation? A. Chairman of the board B. Board of directors C. Chief executive officer D. Chief financial officer E. Shareholders Ans: E AACSB: Reflective thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 01 -04 Explain the conflicts of interest that can arise between managers and owners. Topic: The agency problem and control of the corporation 17. Which one of the follo wing represents a cash outflow from a company? A. Issuance of new securities B. Payment of dividends C. New loan proceeds D.