FIN 301 Exam 1 Questions and Answers Latest Update
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Course
FIN301
Institution
FIN301
There are four basic principles of finance. Which principle correctly describes the following statement: "A dollar today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today"? - Answer-Principle 1: Money has a t...
FIN 301 Exam 1 Questions and Answers
Latest Update
There are four basic principles of finance. Which principle correctly describes the
following statement: "A dollar today is worth more than a dollar received in the future.
Conversely, a dollar received in the future is worth less than a dollar received today"? -
Answer-Principle 1: Money has a time value
In a large corporation the primary responsibility for overseeing the firm's finance-related
activities falls to the - Answer-Chief Financial Officer (CFO)
The typical business organization for large companies is the corporation. Advantages of
the corporate form of business organization include: - Answer--Corporations have a
greater ease in raising large sums of money than other forms of business organization
-The owners' liability is limited to the amount of their investment in the company.
-The life of the business is not tied to the status of the corporate owners.
There are several measures that can be taken to help limit the agency problem. -
Answer--The board of directors can actively monitor the actions of managers to keep
pressure on them to act in the best interest of shareholders.
-Financial markets play a key role in monitoring management.
-Compensation plans can be put in place to reward managers when they maximize
shareholder wealth
-Firms that fail to maximize shareholder wealth may be taken over and their
management team replaced
Which basic principle of finance correctly describes the following statement: "Investors
respond to new information by buying and selling their investments. The speed with
which investors act and the way that prices respond to the information determine the
efficiency of the market"? - Answer-Principle 4: Market prices reflect information
The primary difference between venture capital firms and leveraged buyout funds is that
______________ provide financing for start-up companies when they are first founded
while ________________ acquire established firms. - Answer-venture capital firms;
leveraged buyout funds
Preferred stock is an equity security that has seniority rights. - Answer--Preferred stock
dividends, which are unpaid due to a lack of profits may accrue to be paid later when
the corporation returns to profitability.
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