Test Bank for Fundamentals of Corporate Finance, 4th Edition

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Fundamentals of Corporate Finance, 4e (Berk/DeMarzo/Harford)

Chapter 1 Corporate Finance and the Financial Manager

1.1 Why Study Finance?

1) The Valuation Principle shows how to make the costs and benefits of a decision comparable so that we
can evaluate them properly.

Answer: TRUE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Previous Edition

2) Financial decisions require that you weigh alternatives in strictly monetary terms.

Answer: FALSE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Revised

3) Which of the following best describes why the Valuation Principle is a key concept in making financial
decisions?

A) It shows how to assign monetary value to intangibles such as good health and well-being.

B) It allows fixed assets and liquid assets to be valued correctly.

C) It gives a good indication of the net worth of a person, item, or company and can be used to estimate
any changes in that net worth.

D) It shows how to make the costs and benefits of a decision comparable so that we can weigh them
properly.

Answer: D

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Previous Edition

1.2 The Four Types of Firms

1) Partnerships are the most common type of business firm in the world.

Answer: FALSE

Diff: 1 Var: 1

Skill: Conceptual

AACSB Objective: Analytic Skills

Author: DS

Question Status: Revised

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