Exam 1 FIN

Question 1

Capital Budget

Answer 1

Planning and mamaging a firm’s long-term investment.

Question 2

In capital bugeting, a finanicial manager tries to?

Answer 2

Identify investment opportunities that generate cashflow, that exceeds the cost of the asset.

Question 3

Capital Structure

Answer 3

Mixture of debt and equity maintained by a firm.

Question 4

Working Capital

Answer 4

A firms short-term assets (Inventory) and liabilities(Money owed to suppliers).

Question 5

In working capital, a financial manager inssures?

Answer 5

That the firm has sufficient resources to continue its operations and avoid costly interruptions.

Question 6

In capital structure we determine how we pay for our assets through either?

Answer 6

Debt or equity.

Question 7

Chief Financial Officer

Answer 7

Top fiancnial manager within firm

Question 8

Treasurer oversees?

Answer 8

Cash managment, Credit managment, Capital expenditures, and financial planning

Question 9

Controller oversees?

Answer 9

Taxes, Cost accounting, Financial Accounting, and Data processing

Question 10

Capital structure affects whether a firm can obtain and manage?

Answer 10

The long-term financingit needs to support its long-term investments.

Question 11

A concern of capital budgeting is when they expect that cash and how often.

True or False

Answer 11

True

Question 12

Size, Timing, and Risk of future cashflow si the essence of capital budgeting.

True or False

Answer 12

True

Question 13

Capital structure determines what percentage of the firm’s cashflow goes to creditors and what percentage foes to shareholders.

True or False

Answer 13

True

Question 14

Sole Proprieteorship

Answer 14

Business owed by single person

Question 15

Sole Priprietorship advantages?

Answer 15

Easiest to start, Taxed once, All profits kept, Less regulated

Question 16

Partnership

Answer 16

Two or more individuals

Question 17

Sole Proprietorship Disadvantages?

Answer 17

Unlimited liability, Limited to woners life span, Hard to sell ownership interest, Equity capital limited to owener’s wealth

Question 18

Partnership Advantages?

Answer 18

Two or more owener, More capital availble, Easy to start, income taxed once

Question 19

Partnership disadvantages?

Answer 19

Unlimited liability in general partnership, dissolves when a partner dies, difficult to transfer ownership

Question 20

Limited partnership

Answer 20

one or more general partner will run the business with unlimited liability, but there will be one or more limited partners.

Question 21

Corporation

Answer 21

A disrtinct legal entity composed of one or more individual or entities

Question 22

Corportation Advantages

Answer 22

Limities liablity, unlimited life, soperation of ownership and managment, transfer ownership easily, easier to raise capital

Question 23

Corporation disadvantages

Answer 23

Separation of ownership and management, double taxation.

Question 24

Agency Problems

Answer 24

The possibility of conflict of interest between the stockholders and management of a firm.

Question 25

Agency Relationship

Answer 25

The relationship between stockholders and management. Principles hire agents to run company

Question 26

Managerial Compensation

Answer 26

Incentives used to align MGT and stockholders interests

Question 27

Corporate control

Answer 27

The threat of a take over may result in better management

Question 28

Stakeholders

Answer 28

Someone other than a stakeholder or creditor who potentially has a claim on the cash flows of the firm

Question 29

Primary Market

Answer 29

A market that issues new securities on the exchange

Question 30

Secondary Market

Answer 30

A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves.