Corp Finance CFA Exam Questions And
100% Correct Answers
Which of the following best names the theory that addresses conflicts of interest
between a company's owners and its creditors? - Answer stakeholder theory.
Which of the following best describes an agreement between a company and a labor
union representing most of its employees? - Answer a part of a company's contractual
infrastructure.
The type of voting most likely to permit minority stockholders increased representation
on the board of directors is: - Answer With cumulative voting, shareholders get a vote
for each share they own times the number of director elections each year and can give
all their votes to a single candidate for the board. This helps minority stockholders to get
more proportional representation on the board of directors.
One-tier board structure: Both executives and non-executives can be on the board of
directors.
Which of the following best describes organizational infrastructure in terms of
stakeholder management? How a business processes and manages internally
stakeholder relationships.
Which of the following stakeholders are least likely to benefit from a company's growth
and excellent financial performance? - Answer Governments receive greater tax
revenues when financial performance is excellent and profits are higher. Creditors do
not receive extra returns for performance better than that is adequate to repay debt.
Customers seek company stability and ongoing relationships with the company.
To determine whether management's incentives support a firm's stated goals, an
analyst should examine the firm's: - Answer compensation schemes.
, Stakeholder theory of corporate governance primarily deals with: - Answer Under a
stakeholder theory, the conflicting interests of not only the shareholders but also other
stakeholders is the focus of corporate governance. One of the groups whose interest is
taken into consideration in a stakeholder theory is the shareholders themselves.
Thematic investing is best described as: Solution Thematic investing describes the
process of choosing investments according to a particular view about an environmental,
social, or governance factor. Identifying the best companies in each sector with respect
to environmental and social factors describes the process labeled best-in-class
investing. Excluding companies or sectors from consideration for investment because
of environmental and social factors is referred to as negative screening.
The internal systems and practices a company uses to manage relationships with its
stakeholders are best referred to as its: Answer organizational infrastructure.
The stakeholders who would most be concerned about their legal liabilities are: Answer
directors.
The post-audit serves to: Answer improve cash flow forecasts and stimulate
management to improve operations and bring results into line with forecasts.
Which of the following best describes the IRR and NPV methods? - Select one: The NPV
method assumes a project's cash flows will be reinvested at the cost of capital, whereas
the IRR method assumes they will be reinvested at the IRR.
Which of the following is the LEAST accurate statement regarding NPV and IRR? -
Answer For mutually exclusive projects, you would accept the project with the highest
NPV regardless of the sign of the NPV calculation.
Which of the following is least likely to be an administrative step in the capital budgeting
process? - Answer Arranging financing for capital projects.
100% Correct Answers
Which of the following best names the theory that addresses conflicts of interest
between a company's owners and its creditors? - Answer stakeholder theory.
Which of the following best describes an agreement between a company and a labor
union representing most of its employees? - Answer a part of a company's contractual
infrastructure.
The type of voting most likely to permit minority stockholders increased representation
on the board of directors is: - Answer With cumulative voting, shareholders get a vote
for each share they own times the number of director elections each year and can give
all their votes to a single candidate for the board. This helps minority stockholders to get
more proportional representation on the board of directors.
One-tier board structure: Both executives and non-executives can be on the board of
directors.
Which of the following best describes organizational infrastructure in terms of
stakeholder management? How a business processes and manages internally
stakeholder relationships.
Which of the following stakeholders are least likely to benefit from a company's growth
and excellent financial performance? - Answer Governments receive greater tax
revenues when financial performance is excellent and profits are higher. Creditors do
not receive extra returns for performance better than that is adequate to repay debt.
Customers seek company stability and ongoing relationships with the company.
To determine whether management's incentives support a firm's stated goals, an
analyst should examine the firm's: - Answer compensation schemes.
, Stakeholder theory of corporate governance primarily deals with: - Answer Under a
stakeholder theory, the conflicting interests of not only the shareholders but also other
stakeholders is the focus of corporate governance. One of the groups whose interest is
taken into consideration in a stakeholder theory is the shareholders themselves.
Thematic investing is best described as: Solution Thematic investing describes the
process of choosing investments according to a particular view about an environmental,
social, or governance factor. Identifying the best companies in each sector with respect
to environmental and social factors describes the process labeled best-in-class
investing. Excluding companies or sectors from consideration for investment because
of environmental and social factors is referred to as negative screening.
The internal systems and practices a company uses to manage relationships with its
stakeholders are best referred to as its: Answer organizational infrastructure.
The stakeholders who would most be concerned about their legal liabilities are: Answer
directors.
The post-audit serves to: Answer improve cash flow forecasts and stimulate
management to improve operations and bring results into line with forecasts.
Which of the following best describes the IRR and NPV methods? - Select one: The NPV
method assumes a project's cash flows will be reinvested at the cost of capital, whereas
the IRR method assumes they will be reinvested at the IRR.
Which of the following is the LEAST accurate statement regarding NPV and IRR? -
Answer For mutually exclusive projects, you would accept the project with the highest
NPV regardless of the sign of the NPV calculation.
Which of the following is least likely to be an administrative step in the capital budgeting
process? - Answer Arranging financing for capital projects.
