Principles of Managerial Finance 8th Edition by Chad J. Zutter - Test Bank

Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart)

Chapter 1 The Role of Managerial Finance

1.1 Finance and the firm.

1) A firm is a business organization that sells goods and services.

Answer: TRUE

Diff: 1

Topic: Finance and the firm

Learning Obj.: LG 1

Learning Outcome: F-01

AACSB: Analytical Thinking

2) In finance we say that the goal of the firm ought to be to maximize profits.

Answer: FALSE

Diff: 1

Topic: Finance and the firm

Learning Obj.: LG 1

Learning Outcome: F-01

AACSB: Analytical Thinking

3) Other things being equal, it is better to receive money sooner rather than later.

Answer: TRUE

Diff: 1

Topic: Managing the firm

Learning Obj.: LG 4

Learning Outcome: F-01

AACSB: Analytical Thinking

4) Financial managers evaluating decision alternatives or potential actions must consider

________.

A) only risk

B) only return

C) either risk or return

D) risk, return, and the impact on share price

Answer: D

Diff: 1

Topic: Maximize Shareholder Wealth

Learning Obj.: LG 3

Learning Outcome: F-01

AACSB: Analytical Thinking

1

Copyright © 2019 Pearson Education, Inc.5) If a firm earns a profit, it will necessarily also generate a positive cash flow.

Answer: FALSE

Diff: 2

Topic: Managing the firm

Learning Obj.: LG 4

Learning Outcome: F-01

AACSB: Analytical Thinking

6) If a firm's stockholders are risk averse, the firm can make its stockholders better off by earning

the highest possible returns on its investments.

Answer: FALSE

Diff: 2

Topic: Managing the firm

Learning Obj.: LG 4

Learning Outcome: F-01

AACSB: Analytical Thinking

7) Which of the following is an example of a firm's stakeholder?

A) suppliers

B) Federal Reserve

C) media

D) competitors

Answer: A

Diff: 1

Topic: What About Stakeholders?

Learning Obj.: LG 3

Learning Outcome: F-01

AACSB: Analytical Thinking

2