Exam (elaborations)
FINC 300 Midterm Exam Questions And Answers Latest Update
- Course
- FINC 300
- Institution
- American Military University
FINC 300 Midterm Exam Questions And Answers Latest Update
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Solution 2024/2025Pepper
FINC 300 Midterm Exam Questions And
Answers Latest Update
financial management ANS✔✔ maintenance and creation of economic value
or wealth by focusing on decision making with eye toward creating wealth
fundamental goal of business ANS✔✔ create value for shareholders by
maximization of shareholder wealth
shareholders ANS✔✔ legal owners of the firm
5 principles that form the foundations of finance ANS✔✔ 1) cash flow is
what matters
2) money has a time value
3) risk requires a reward
4) market prices are generally right
5) conflicts of interest cause agency problems
cash flow is what matters ANS✔✔ -represents money that can be spent
-determine value of business
-incremental cash flow
money has a time value ANS✔✔ opportunity cost
, Solution 2024/2025
Pepper
opportunity cost ANS✔✔ cost of making a choice in terms of the next best
alternative that must be foregone
risk requires a reward ANS✔✔ return must satisfy 2 requirements:
1) a return for delaying consumption
2) an additional return for taking on a risk
market prices are generally right ANS✔✔ efficient market
conflicts of interests cause agency problems ANS✔✔ -what is best for
managers vs what is best for stockholders
-agency problem
agency problem ANS✔✔ problems and conflicts resulting from the
separation of the management and ownership of the firm
-root of the problem is conflict of interests
finance ANS✔✔ the study of how people and businesses evaluate
investments and raise capital to fund them
3 issues finance addresses ANS✔✔ 1) capital budgeting
2) capital structure decisions
3) working capital management
working capital management ANS✔✔ management of firms current assets
and short term financing
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