CORPORATE FINANCE EXAM 1
QUESTIONS AND ANSWERS 2026
(100% VERIFIED)
Disadvantages of Sole Proprietorship - CORRECT ANSWER (S) -unlimited liability,
limited life, difficulty in transferring ownership, difficult to raise capitalized funds.
Advantages of Sole Proprietorship - CORRECT ANSWER (S) -simpler, less
regulation, owners are managers, personal taxes can be better than corporate
taxes
Disadvantage of a corporate form of organization - CORRECT ANSWER (S) -double
taxation of distributed funds and dividends
,advantages of a corporate form of organization - CORRECT ANSWER (S) -limited
liability, ease of transferability, ability to raise capital, and unlimited life
What goal should always motivate the actions of a firm's financial manager? -
CORRECT ANSWER (S) -To maximize the current market value (share price) of the
equity of the firm (whether it's publicly traded or not).
Who owns a corporation? - CORRECT ANSWER (S) -In the corporate form of
ownership, the shareholders are the owners of the firm.
Describe the process whereby the owners control the firm's management. -
CORRECT ANSWER (S) -The shareholders elect the directors of the corporation,
who in turn appoint the firm's management.
What is the main reason that an agency relationship exists in the corporate form
of organization? In this context, what kinds of problems can arise? - CORRECT
ANSWER (S) -This separation of ownership from control in the corporate form of
, organization is what causes agency problems to exist. Management may act in its
own or someone else's best interests, rather than those of the shareholders. If
such events occur, they may contradict the goal of maximizing the share price of
the equity of the firm.
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current
liabilities of $4,100, and long-term debt of $10,200. What is the value of the
shareholders' equity account for this firm? - CORRECT ANSWER (S) -Current Assets
+ Net Fixed Assets= $32,200 Current liabilities + Long Term Debt= $14,300 Equity=
Assets - Costs = $32,200-$14,300= $17,900
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current
liabilities of $4,100, and long-term debt of $10,200. How much is net working
capital? - CORRECT ANSWER (S) -Networking Capital= Current Assets - Current
Liabilities = $4900-$4100= $800
equity formula - CORRECT ANSWER (S) -Assets - Liabilities(costs)
QUESTIONS AND ANSWERS 2026
(100% VERIFIED)
Disadvantages of Sole Proprietorship - CORRECT ANSWER (S) -unlimited liability,
limited life, difficulty in transferring ownership, difficult to raise capitalized funds.
Advantages of Sole Proprietorship - CORRECT ANSWER (S) -simpler, less
regulation, owners are managers, personal taxes can be better than corporate
taxes
Disadvantage of a corporate form of organization - CORRECT ANSWER (S) -double
taxation of distributed funds and dividends
,advantages of a corporate form of organization - CORRECT ANSWER (S) -limited
liability, ease of transferability, ability to raise capital, and unlimited life
What goal should always motivate the actions of a firm's financial manager? -
CORRECT ANSWER (S) -To maximize the current market value (share price) of the
equity of the firm (whether it's publicly traded or not).
Who owns a corporation? - CORRECT ANSWER (S) -In the corporate form of
ownership, the shareholders are the owners of the firm.
Describe the process whereby the owners control the firm's management. -
CORRECT ANSWER (S) -The shareholders elect the directors of the corporation,
who in turn appoint the firm's management.
What is the main reason that an agency relationship exists in the corporate form
of organization? In this context, what kinds of problems can arise? - CORRECT
ANSWER (S) -This separation of ownership from control in the corporate form of
, organization is what causes agency problems to exist. Management may act in its
own or someone else's best interests, rather than those of the shareholders. If
such events occur, they may contradict the goal of maximizing the share price of
the equity of the firm.
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current
liabilities of $4,100, and long-term debt of $10,200. What is the value of the
shareholders' equity account for this firm? - CORRECT ANSWER (S) -Current Assets
+ Net Fixed Assets= $32,200 Current liabilities + Long Term Debt= $14,300 Equity=
Assets - Costs = $32,200-$14,300= $17,900
Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current
liabilities of $4,100, and long-term debt of $10,200. How much is net working
capital? - CORRECT ANSWER (S) -Networking Capital= Current Assets - Current
Liabilities = $4900-$4100= $800
equity formula - CORRECT ANSWER (S) -Assets - Liabilities(costs)
