Chapter 1-3 Finance

True / False Questions 1. The liability of sole proprietors is limited to the amount of their investment in the company.
FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3 2. General partners have limited personal liability for business debts in a limited partnership.
FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Medium
Learning Objective: 1-3 3. The separation of ownership and management is one distinctive feature of corporations.
TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-3 4. A major disadvantage of partnerships is that they have "double taxation" of profits.
FALSE

AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Easy
Learning Objective: 1-3

5. Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce.
TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-2 6. Capital budgeting decisions are used to determine how to raise the cash necessary for investments.
FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-1 7. A successful investment is one that increases the value of the firm.
TRUE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Easy
Learning Objective: 1-1 8. BP's committing of $500 million to partnership with University of California–Berkeley to develop new sources of energy is a capital budgeting decision.
TRUE

AACSB: Reflective Thinking Skills
Bloom's: Application
Difficulty: Easy
Learning Objective: 1-1

9. Boards of directors are often portrayed as active supporters of top management.
FALSE

AACSB: Reflective Thinking Skills
Bloom's: Understanding
Difficulty: Medium
Learning Objective: 1-3 10.