Exam (elaborations)
FUNDAMENTALS OF CORPORATE FINANCE EXAM FULLY SOLVED -1
- Course
- Institution
FUNDAMENTALS OF CORPORATE FINANCE EXAM FULLY SOLVED -1
[Show more]
Content preview
FUNDAMENTALS OF CORPORATE FINANCE EXAM FULLY SOLVED#1
Definition of Corporate Finance - correct answer the study of the relationship between
business decisions and the value of the stock in the business
Capital Budgeting - correct answer the process of planning and managing a firm's long-
term investments
Capital Structure (or Financial Structure) - correct answer the mixture of long-term debt
and equity maintained by a firm to finance its operations
Working Capital - correct answer a firm's short-term assets (ie cash, inventory) and
liabilities (ie accounts payable to suppliers)
What is the capital budgeting decision? - correct answer the acquisition of long-term
investments. The value of the cash flow generated by an asset exceeds the cost of that
asset.
Sole Proprietorship - correct answer business owned by a single individual.
Pros: easy and inexpensive to form, individual retains all profits
Cons: individual has unlimited liability to debt, the organization is limited to the life of the
owner, capital is often limited to owner's personal wealth
Partnership (2 types) - correct answer business formed by 2 or more individuals or
entities.
General: partners receive equal profits and liability
Limited: one or more of the partners will be subject to liability, others will be limited but
not actively involved in management. Division of profits is relative.
Corporation - correct answer business created as a distinct legal entity composed of
one or more individuals or entities; a legal "person" separate and distinct from its
owners; complicated to form, subject to taxes
LLC - correct answer hybrid of partnership and corporation. Operates and taxed like a
partnership but retains limited liability for owners, IRS may double tax if too 'corporation-
like'
Why is the corporate form of business organization superior when it comes to raising
cash? - correct answer ease of transferring ownership, limited liability to debt, unlimited
life of the business
Goal of Financial Management - correct answer to maximize the current value per share
fo the existing stock
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller YOURVERIFIEDEXAMPLUG. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.79. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75323 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now