CORPORATE FINANCE - EXAM 1 QUESTIONS AND ANSWERS LATEST EDITION 2026

CORPORATE FINANCE - EXAM 1
QUESTIONS AND ANSWERS LATEST
EDITION 2026

What is corporate finance? - CORRECT ANSWER (S) -What assets a company

should buy

What projects to invest in


How to raise cash to finance these investments


in order to MAINTAIN AND MAXIMIZE ECONOMIC VALUE




Ultimately, the firm must be a __ - CORRECT ANSWER (S) -cash generating activity




The cash flows from the firm must __ the cash flows from the financial markets -

CORRECT ANSWER (S) -exceed

,2 main questions - CORRECT ANSWER (S) -1. Capital budgeting


2. Capital structure




Capital budgeting decision - CORRECT ANSWER (S) -What long-term investments

should the firm choose?


Fixed Assets




Capital structure decision - CORRECT ANSWER (S) -How should the firm raise

funds for the selected investments


Liabilities and SH Equity




Ultimate goal of financial managers - CORRECT ANSWER (S) -Shareholder wealth

maximization


= maximizing firm value


= maximizing stock price

, SH wealth - CORRECT ANSWER (S) -stock price (fluctuates, want to maximize) *

shares outstanding (relatively stable)




Financial analyst reports are ___ looking - CORRECT ANSWER (S) -forward




Annual and quarterly reports are __ looking - CORRECT ANSWER (S) -backward




Media is ___ information - CORRECT ANSWER (S) -current




Financial analyst reports, annual and quarterly reports, and media are all ___

information - CORRECT ANSWER (S) -public




Insider trading - CORRECT ANSWER (S) -any time a person trades while aware of

material nonpublic information




Illegal