ASU FIN 300 Exam 1|Questions With Correct
Answers|Verified
Productive assets - ✔️the long-term tangible and intangible assets a firm uses to
generate cash flows
3 fundamental decisions in financial management - ✔️a. Capital budgeting- which
productive assets to buy
b. Financing decisions- raising money to buy more p assets, mainly through selling long
term debt and equity
c. Working capital decisions- involve how firms manage their current assets and
liabilities. Enough money to pay the bills and any money left over is invested to earn a
return
Forms of Business Organization - ✔️a. Sole proprietorship- earnings taxed as personal
income, owner has all of the liability
b. Partnership- more management skills with two people, complicated decision making
c. Corporation- separate legal status and ability to recruit professional management,
corporate income taxed twice, conflicting goals between owners and management
d. LLC- owners not personally responsible, combine corporation with sole proprietorship
C Corporation - ✔️The most common type of corporation, which is a legal business
entity that offers limited liability to all of its owners, who are called stockholders
S Corporation - ✔️corporation taxed as though it were a partnership with restrictions on
shareholders
B Corporation - ✔️a business that explicitly seeks to blend its social objectives with its
financial goals
The goal of the firm - ✔️maximize shareholder wealth
Sarbanes-Oxley Act - ✔️A law passed by Congress that requires the CEO and CFO to
certify that their firm's financial statements are accurate.
information asymmetry - ✔️situation in which one party is more informed than another
because of the possession of private information
financial asset - ✔️claim on the property or income of a borrower
Real Assets - ✔️assets used to produce goods and services
primary market - ✔️market for selling financial assets that can only be redeemed by the
original holder
Answers|Verified
Productive assets - ✔️the long-term tangible and intangible assets a firm uses to
generate cash flows
3 fundamental decisions in financial management - ✔️a. Capital budgeting- which
productive assets to buy
b. Financing decisions- raising money to buy more p assets, mainly through selling long
term debt and equity
c. Working capital decisions- involve how firms manage their current assets and
liabilities. Enough money to pay the bills and any money left over is invested to earn a
return
Forms of Business Organization - ✔️a. Sole proprietorship- earnings taxed as personal
income, owner has all of the liability
b. Partnership- more management skills with two people, complicated decision making
c. Corporation- separate legal status and ability to recruit professional management,
corporate income taxed twice, conflicting goals between owners and management
d. LLC- owners not personally responsible, combine corporation with sole proprietorship
C Corporation - ✔️The most common type of corporation, which is a legal business
entity that offers limited liability to all of its owners, who are called stockholders
S Corporation - ✔️corporation taxed as though it were a partnership with restrictions on
shareholders
B Corporation - ✔️a business that explicitly seeks to blend its social objectives with its
financial goals
The goal of the firm - ✔️maximize shareholder wealth
Sarbanes-Oxley Act - ✔️A law passed by Congress that requires the CEO and CFO to
certify that their firm's financial statements are accurate.
information asymmetry - ✔️situation in which one party is more informed than another
because of the possession of private information
financial asset - ✔️claim on the property or income of a borrower
Real Assets - ✔️assets used to produce goods and services
primary market - ✔️market for selling financial assets that can only be redeemed by the
original holder
