Corporate Finance Chapter 1 Questions and
Answers Grade A+ 2023
Corporate Finance - -The study of ways to answer these questions:
Where will you get the long term financing for those investments? Will you bring in other
owners or will you borrow the money?
How will you manage your everyday financial activities such as collecting from customers and
paying suppliers?
What long term investments should you take on? That is, what lines of business will you be in
what sorts of buildings, machinery, and equipment will you need?
-Stockholders (owners) are - -usually not involved in the decision making day-to-day process
-What is defined as a firm's short-term assets and its short-term liabilities? - -Working Capital
-A business formed by two or more individuals who each have unlimited liability for all of the
firm's business debts is called a: - -General Partnership
-A business created as a distinct legal entity and treated as a legal "person" is called a: - -
Corporation
-A stakeholder is: - -Any person or entity other than a stockholder or creditor who potentially has
a claim on the cash flows of a firm.
-Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants
to limit his liability to his initial investment and has no interest in the daily operations. Sam will
contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo
will be involved as an active consultant and manager and will also contribute funds. Sam and
Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose
by doing so. All three individuals will share in the firm's profits and wish to keep the initial
organizational costs of the business to a minimum. Which form of business entity should these
individuals adopt? - -Limited partnership.
-Why should financial managers strive to maximize the current value per share of the existing
stock? - -Because they have been hired to represent the interests of the current shareholders.
-Which one of the following is a primary market transaction? - -Sale of a new share of stock to
an individual investor.
-True or False
Auction markets match buy and sell orders. - -True
, -True or False
Private placements must be registered with the SEC. - -False
-True or False
All secondary markets are auction markets. - -False
-True or False
Dealer markets have a physical trading floor. - -False
-True or False
Dealers arrange trades but never own the securities traded. - -False
-Which one of these is a working capital management decision?
Determining the minimum level of cash to be kept in a checking account.
Determining the best method of producing a product.
Determining the number of employees needed to work during a particular shift.
Determining when to replace obsolete equipment.
Determining if a competitor should be acquired. - -Determining the minimum level of cash to be
kept in a checking account.
-Financial managers should primarily focus on the interests of:
Multiple Choice
Stakeholders.
The vice president of finance.
Their immediate supervisor.
Shareholders.
The board of directors. - -Shareholders
-A business owned by a solitary individual who has unlimited liability for its debt is called a: - -
Sole proprietorship.
Answers Grade A+ 2023
Corporate Finance - -The study of ways to answer these questions:
Where will you get the long term financing for those investments? Will you bring in other
owners or will you borrow the money?
How will you manage your everyday financial activities such as collecting from customers and
paying suppliers?
What long term investments should you take on? That is, what lines of business will you be in
what sorts of buildings, machinery, and equipment will you need?
-Stockholders (owners) are - -usually not involved in the decision making day-to-day process
-What is defined as a firm's short-term assets and its short-term liabilities? - -Working Capital
-A business formed by two or more individuals who each have unlimited liability for all of the
firm's business debts is called a: - -General Partnership
-A business created as a distinct legal entity and treated as a legal "person" is called a: - -
Corporation
-A stakeholder is: - -Any person or entity other than a stockholder or creditor who potentially has
a claim on the cash flows of a firm.
-Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants
to limit his liability to his initial investment and has no interest in the daily operations. Sam will
contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo
will be involved as an active consultant and manager and will also contribute funds. Sam and
Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose
by doing so. All three individuals will share in the firm's profits and wish to keep the initial
organizational costs of the business to a minimum. Which form of business entity should these
individuals adopt? - -Limited partnership.
-Why should financial managers strive to maximize the current value per share of the existing
stock? - -Because they have been hired to represent the interests of the current shareholders.
-Which one of the following is a primary market transaction? - -Sale of a new share of stock to
an individual investor.
-True or False
Auction markets match buy and sell orders. - -True
, -True or False
Private placements must be registered with the SEC. - -False
-True or False
All secondary markets are auction markets. - -False
-True or False
Dealer markets have a physical trading floor. - -False
-True or False
Dealers arrange trades but never own the securities traded. - -False
-Which one of these is a working capital management decision?
Determining the minimum level of cash to be kept in a checking account.
Determining the best method of producing a product.
Determining the number of employees needed to work during a particular shift.
Determining when to replace obsolete equipment.
Determining if a competitor should be acquired. - -Determining the minimum level of cash to be
kept in a checking account.
-Financial managers should primarily focus on the interests of:
Multiple Choice
Stakeholders.
The vice president of finance.
Their immediate supervisor.
Shareholders.
The board of directors. - -Shareholders
-A business owned by a solitary individual who has unlimited liability for its debt is called a: - -
Sole proprietorship.
