FIN 340 CHAPTERS 1-5 TEST QUESTIONS AND ANSWERS
Investment Decision - ANSWER Spend money (capital budgeting or
capital expenditure)
Financing Decision - ANSWER Raise money for investment
A share of stock is a - ANSWER financial asset
Securities - ANSWER stocks and bonds
Financial managers are responsible for the corporations - ANSWER
financing and investment decisions
CFO - ANSWER Financial policy and financial planning - supervises all
financial functions
Stockholders are - ANSWER owners of a corporation
Managers of a corporation are the ? of the shareholders - ANSWER
agents
Sole Proprietorship - ANSWER unlimited liability
Financial objective of corporations financial managers is to - ANSWER
maximize the market value of the firm
Corporate Governance - ANSWER laws, regulations, institutions, and
corporate practices that protect investors
Professional corporations are often created by - ANSWER doctors and
accountants
Controller - ANSWER ensures that the corporations money is used
efficiently - responsible for internal budgets, accounting, taxes
, Treasurer - ANSWER Responsible for maintaining relationships with
banks and other investors, financing, cash management, capital
budgeting, capital structure
Stock options - ANSWER Provide powerful incentives to maximize stock
price per share
Capital structure - ANSWER mix of long term debt and equity financing
Agency Problem - ANSWER Managers are agents for shareholders and
are tempted to act in own interests rather than maximizing value
Agency Cost - ANSWER Value lost from agency problems
Financial Intermediaries - ANSWER Important source of financing for
corporations
What is the main investment for a financial intermediary? - ANSWER
financial assets
For large public corporations, the savings flow through - ANSWER
financial markets and intermediaries
Investment banks - ANSWER underwrite stock offerings and advise on
mergers and acquisitions
Which markets are used to adjust the firm's exposure to risk? -
ANSWER commodities market, derivative market
What market is used to sell equity and long-term debt securities -
ANSWER Capital market
Pension Fund - ANSWER Fund set up by an employer to provide for
employees retirement
Fixed-Income Market - ANSWER sells debt securities
Money Market - ANSWER Trades short-term securities
Investment Decision - ANSWER Spend money (capital budgeting or
capital expenditure)
Financing Decision - ANSWER Raise money for investment
A share of stock is a - ANSWER financial asset
Securities - ANSWER stocks and bonds
Financial managers are responsible for the corporations - ANSWER
financing and investment decisions
CFO - ANSWER Financial policy and financial planning - supervises all
financial functions
Stockholders are - ANSWER owners of a corporation
Managers of a corporation are the ? of the shareholders - ANSWER
agents
Sole Proprietorship - ANSWER unlimited liability
Financial objective of corporations financial managers is to - ANSWER
maximize the market value of the firm
Corporate Governance - ANSWER laws, regulations, institutions, and
corporate practices that protect investors
Professional corporations are often created by - ANSWER doctors and
accountants
Controller - ANSWER ensures that the corporations money is used
efficiently - responsible for internal budgets, accounting, taxes
, Treasurer - ANSWER Responsible for maintaining relationships with
banks and other investors, financing, cash management, capital
budgeting, capital structure
Stock options - ANSWER Provide powerful incentives to maximize stock
price per share
Capital structure - ANSWER mix of long term debt and equity financing
Agency Problem - ANSWER Managers are agents for shareholders and
are tempted to act in own interests rather than maximizing value
Agency Cost - ANSWER Value lost from agency problems
Financial Intermediaries - ANSWER Important source of financing for
corporations
What is the main investment for a financial intermediary? - ANSWER
financial assets
For large public corporations, the savings flow through - ANSWER
financial markets and intermediaries
Investment banks - ANSWER underwrite stock offerings and advise on
mergers and acquisitions
Which markets are used to adjust the firm's exposure to risk? -
ANSWER commodities market, derivative market
What market is used to sell equity and long-term debt securities -
ANSWER Capital market
Pension Fund - ANSWER Fund set up by an employer to provide for
employees retirement
Fixed-Income Market - ANSWER sells debt securities
Money Market - ANSWER Trades short-term securities
