Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank

Learning Outcome:  F-01
AACSB:  Reflective Thinking
 
10) The money that firms raise to finance their activities is called ________.
A) the capital budget
B) working capital
C) capital
D) accruals
Answer:  C
Diff: 1
Topic:  Managing the Firm
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
11) Marginal cost-benefit analysis states that financial decisions should be made and actions should be taken only when the added benefits exceed the added costs.
Answer:  TRUE
Diff: 1
Topic:  Relationship to Economics
Learning Obj.:  LG 4
Learning Outcome:  F-03
AACSB:  Analytical Thinking
 
12) The treasurer typically manages a firm's cash, investing surplus funds when available and securing outside financing when needed.
Answer:  TRUE
Diff: 1
Topic:  Relationship to Accounting
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
13) A corporate treasurer's focus tends to be more external, while the controller's focus is more internal.
Answer:  TRUE
Diff: 1
Topic:  Organization of the Finance Function
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 

14) The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.
Answer:  TRUE
Diff: 1
Topic:  Relationship to Accounting
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
15) A treasurer is commonly responsible for handling ________.
A) tax management
B) corporate accounting
C) investing surplus funds
D) cost accounting
Answer:  C
Diff: 1
Topic:  Organization of the Finance Function
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
16) Which of the following is true of accrual basis accounting?
A) Expenses are recognized either when they are incurred or cash is paid.
B) Revenue is recognized when a customer pays cash.
C) Expenses are recognized when they are incurred.
D) Revenue is recognized when a customer pays cash or shows interest to purchase the product or service.
Answer:  C
Diff: 1
Topic:  Relationship to Accounting
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
17) Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are ________.
A) $3,000 and $10,000, respectively
B) $3,000 and -$7,000, respectively
C) $7,000 and -$3,000, respectively
D) $3,000 and $7,000, respectively
Answer:  B
Diff: 2
Topic:  Relationship to Accounting
Learning Obj.:  LG 4
Learning Outcome:  F-02
AACSB:  Analytical Thinking
 

18) A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandise purchased during the year at a total cost of $112,500. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are ________.
A) $0 and $150,000, respectively
B) $37,500 and -$150,000, respectively
C) $37,500 and -$112,500, respectively
D) $150,000 and $112,500, respectively
Answer:  C
Diff: 2
Topic:  Relationship to Accounting
Learning Obj.:  LG 4
Learning Outcome:  F-02
AACSB:  Analytical Thinking
 
19) Stockholders expect to earn higher rates of return on investments with lower risk and lower rates of return on investments with higher risk.
Answer:  FALSE
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
20) As the risk of a stock investment increases, investors' ________.
A) return will increase
B) return will decrease
C) required rate of return will decrease
D) required rate of return will increase
Answer:  D
Diff: 1
Topic:  Maximize Shareholder Wealth
Learning Obj.:  LG 3
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
21) The principal-agent problem arises when ________.
A) the owners of the firm are not the people managing the firm