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FIN 381 Exam 1 (Ch 1,2,3,4) Questions, Answers, Rationales
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FIN 381 Exam 1 (Ch 1,2,3,4) Questions, Answers, Rationales
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FIN 381 Exam 1 (Ch: 1,2,3,4)Study online at https://quizlet.com/_enmte7
1. What are the three types if financial management capital budgeting,
decisions? capital structure,
and working capi-
tal mangement
2. what are the 5 main areas of financial topics? corporate finance,
investments, fi-
nancial institu-
tions, Internation-
al finance, and fin-
tech
3. deals with financial assets (e.g., stocks and bonds) investments
- Career paths in this field include becoming a finan-
cial advisor, portfolio manager, or security analyst
4. businesses that deal primarily in financial matters financial institu-
(e.g., banks and insurance companies) tions
5. careers generally involve international aspects of ei- International Fi-
ther corporate finance, investments, or financial insti- nance
tutions
6. combination of technology and finance fintech
7. focus of the textbook: the study of ways to answer the corporate finance
three questions dealing with corporate budgeting,
capital structure, and working capital
8. In a for-profit business, the _______ is to make money goal of financial
or add value for the owners management
9. specific mixture of long-term debt and equity that a capital structure
firm chooses to use
10. the process of planning and managing a firm's capital budgeting
long-term investments
•Evaluating the size, timing, and risk of future cash
flows is the essence of capital budgeting
, FIN 381 Exam 1 (Ch: 1,2,3,4)
Study online at https://quizlet.com/_enmte7
11. the mixture of debt and equity maintained by a firm capital structure
• How much should the firm borrow (i.e., what mixture
of debt and equity is best)?
• What are the least expensive sources of funds for
the firm?
12. refers to a firm's short-term assets and liabilities working capital
management
13. What long-term investments should you take on (i.e., Corporate Bud-
what lines of business will you be in and what sorts of geting
buildings, machinery, and equipment will you need?)
14. Where will you get the long-term financing to pay for Capital Structure
your investment? Will you bring in other owners or
will you borrow the money?
15. How will you manage your everyday financial activi- working capital
ties, such as collecting from customers and paying
suppliers?
16. what are the 3 different legal forms of business orga- 1. Sole proprietor-
nization? ship
2 .Partnership
3. Corporation
17. a business owned by a single individual sole proprietor-
ship
18. a business formed by two or more individuals or partnership
entities
19. a business created as a distinct legal entity com- Corporation
posed of one or more individuals or entities
- Legal "person," separate and distinct from its own-
ers with many of the rights, duties, and privileges of
an actual person
20. raise cash for in-
vestment
, FIN 381 Exam 1 (Ch: 1,2,3,4)
Study online at https://quizlet.com/_enmte7
Primary disadvantages of sole proprietorships and
partnerships lead to the central problem of the inabil-
ity to _______
21. Why is the corporate form superior when it comes to • Ownership can
raising cash? be readily trans-
ferred
• Life of corpora-
tion is unlimited
• Limited liability
for stockholders
22. What are the four primary disadvantages of sole pro- 1) unlimited liabili-
prietorship and partnership forms of business orga- ty
nizations? 2) limited life
3) difficulty in
transferring own-
ership
4) difficulty in rais-
ing capital funds.
23. What are the benefits of sole proprietorship and part- - simpler
nership forms of business organizations as opposed - less regulation
to corporate forms? - the owners are
also the managers
- sometimes per-
sonal tax rates are
better than corpo-
rate tax rates.
24. What is the primary disadvantage of the corporate double taxation to
form of organization? shareholders
25. • Section 404 requires each company's annual report requirements of
to have an assessment of the company's internal Sarbanes-Oxley
control structure and financial reporting Act/SOX
• Officers of the corporation must review and sign
annual reports
• Annual report must list any deficient in internal
controls
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