FINA 365 Final Exam V1 – Updated Actual Questions and
Answers with Rationales 2026/2027
PART I — CORPORATE FINANCE & FINANCIAL STATEMENTS
1. What is the primary financial objective of a corporation?
A. Maximize sales volume
B. Maximize shareholder wealth
C. Minimize employee turnover
D. Maximize accounting expenses
Answer: B. Maximize shareholder wealth
Rationale: Corporate financial decisions are generally evaluated according to
whether they increase the economic value of the owners' investment.
2. Which financial statement presents a firm's financial position at a specific
date?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet reports assets, liabilities, and shareholders' equity at
a particular point in time.
3. Which accounting equation is correct?
A. Assets = Liabilities − Equity
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Equity
,Answer: B. Assets = Liabilities + Equity
Rationale: Every asset is financed through either creditor claims or owners'
claims.
4. Which statement measures revenues and expenses over a period?
A. Balance sheet
B. Income statement
C. Statement of financial position
D. Cash budget
Answer: B. Income statement
Rationale: The income statement summarizes operating performance over a
specified period.
5. Which of the following is normally a current asset?
A. Building
B. Long-term bond payable
C. Accounts receivable
D. Common stock
Answer: C. Accounts receivable
Rationale: Accounts receivable are generally expected to be collected within the
operating cycle or one year.
6. Which is normally a current liability?
A. Inventory
B. Accounts payable
C. Common stock
D. Equipment
Answer: B. Accounts payable
,Rationale: Accounts payable are short-term obligations arising from purchases on
credit.
7. Net working capital is calculated as:
A. Total assets − total liabilities
B. Current assets − current liabilities
C. Equity − debt
D. Sales − expenses
Answer: B. Current assets − current liabilities
Rationale: NWC measures the amount by which current operating assets exceed
current operating liabilities.
8. If current assets are $300,000 and current liabilities are $150,000, NWC
equals:
A. $100,000
B. $150,000
C. $300,000
D. $450,000
Answer: B. $150,000
Rationale: NWC = $300,000 − $150,000 = $150,000.
9. If a firm buys inventory with cash, the immediate effect is:
A. Total assets increase
B. Total assets decrease
C. One asset increases while another decreases
D. Liabilities increase
Answer: C. One asset increases while another decreases
, Rationale: Inventory increases by the amount paid while cash decreases by the
same amount.
10. If a company purchases equipment by issuing long-term debt:
A. Assets and liabilities increase
B. Assets and equity decrease
C. Liabilities decrease
D. Equity immediately increases
Answer: A. Assets and liabilities increase
Rationale: Equipment increases assets while the debt obligation increases
liabilities.
11. Which statement reports cash inflows and outflows?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Trial balance
Answer: C. Statement of cash flows
Rationale: The cash-flow statement explains changes in cash through operating,
investing, and financing activities.
12. Depreciation is generally:
A. A cash outflow every year
B. A noncash allocation of asset cost
C. A financing inflow
D. A dividend
Answer: B. A noncash allocation of asset cost
Answers with Rationales 2026/2027
PART I — CORPORATE FINANCE & FINANCIAL STATEMENTS
1. What is the primary financial objective of a corporation?
A. Maximize sales volume
B. Maximize shareholder wealth
C. Minimize employee turnover
D. Maximize accounting expenses
Answer: B. Maximize shareholder wealth
Rationale: Corporate financial decisions are generally evaluated according to
whether they increase the economic value of the owners' investment.
2. Which financial statement presents a firm's financial position at a specific
date?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C. Balance sheet
Rationale: The balance sheet reports assets, liabilities, and shareholders' equity at
a particular point in time.
3. Which accounting equation is correct?
A. Assets = Liabilities − Equity
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Equity
,Answer: B. Assets = Liabilities + Equity
Rationale: Every asset is financed through either creditor claims or owners'
claims.
4. Which statement measures revenues and expenses over a period?
A. Balance sheet
B. Income statement
C. Statement of financial position
D. Cash budget
Answer: B. Income statement
Rationale: The income statement summarizes operating performance over a
specified period.
5. Which of the following is normally a current asset?
A. Building
B. Long-term bond payable
C. Accounts receivable
D. Common stock
Answer: C. Accounts receivable
Rationale: Accounts receivable are generally expected to be collected within the
operating cycle or one year.
6. Which is normally a current liability?
A. Inventory
B. Accounts payable
C. Common stock
D. Equipment
Answer: B. Accounts payable
,Rationale: Accounts payable are short-term obligations arising from purchases on
credit.
7. Net working capital is calculated as:
A. Total assets − total liabilities
B. Current assets − current liabilities
C. Equity − debt
D. Sales − expenses
Answer: B. Current assets − current liabilities
Rationale: NWC measures the amount by which current operating assets exceed
current operating liabilities.
8. If current assets are $300,000 and current liabilities are $150,000, NWC
equals:
A. $100,000
B. $150,000
C. $300,000
D. $450,000
Answer: B. $150,000
Rationale: NWC = $300,000 − $150,000 = $150,000.
9. If a firm buys inventory with cash, the immediate effect is:
A. Total assets increase
B. Total assets decrease
C. One asset increases while another decreases
D. Liabilities increase
Answer: C. One asset increases while another decreases
, Rationale: Inventory increases by the amount paid while cash decreases by the
same amount.
10. If a company purchases equipment by issuing long-term debt:
A. Assets and liabilities increase
B. Assets and equity decrease
C. Liabilities decrease
D. Equity immediately increases
Answer: A. Assets and liabilities increase
Rationale: Equipment increases assets while the debt obligation increases
liabilities.
11. Which statement reports cash inflows and outflows?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Trial balance
Answer: C. Statement of cash flows
Rationale: The cash-flow statement explains changes in cash through operating,
investing, and financing activities.
12. Depreciation is generally:
A. A cash outflow every year
B. A noncash allocation of asset cost
C. A financing inflow
D. A dividend
Answer: B. A noncash allocation of asset cost
