fundamentals of corporate finance 11th canadian edition By Stephen A. Ross Test bank
14) Common stockholders or limited partners can lose, at most, what they have invested in a firm.
⊚ true
⊚ false
⊚ false
15) Partnership income is treated as personal income of the partners.
⊚ true
⊚ false
⊚ false
16) A limited partner can lose his or her investment in the partnership.
⊚ true
⊚ false
⊚ false
17) Maximization of the current earnings of the firm is the main goal of the financial manager.
⊚ true
⊚ false
⊚ false
18) The primary goal of a financial manager should be to maximize the value of shares issued to new investors in the corporation.
⊚ true
⊚ false
⊚ false
19) The primary goal of financial management is to minimize the corporate tax liability.
⊚ true
⊚ false
⊚ false
20) Control of the firm ultimately rests with board of directors. They elect the management, who, in turn, lead the company.
⊚ true
⊚ false
⊚ false
21) The goal of financial managers does not imply that illegal or unethical actions should be taken in the hope of increasing the value of the firm.
⊚ true
⊚ false
⊚ false
22) Unethical behaviour does not impact volatility of the stock markets.
⊚ true
⊚ false
⊚ false
23) The board of directors has the power to act on behalf of the shareholders to hire and fire the operating management of the firm. In a legal sense, the directors are "principals" and the shareholders are "agents".
⊚ true
⊚ false
⊚ false
24) When owners are managers (such as in a sole proprietorship), a firm will have agency costs.
⊚ true
⊚ false
⊚ false
25) IBEC Inc. of Toronto spends approximately $2 million annually to hire auditors to go over the firm's financial statements. This is an example of an indirect agency cost.
⊚ true
⊚ false
⊚ false
26) Control of the firm ultimately rests with shareholders. They elect the board of directors, who then hire and fire management.
⊚ true
⊚ false
⊚ false
27) Stakeholder theory suggests that employees, customers, suppliers, and various levels of government all have financial interests in the firm.
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