FINA 3000 TEST 1 UGA POPE EXAM
QUESTIONS 100% CORRECT.
maximize wealth, time value of money, risk vs return, leverage, diversification -
ANSWERwhat are the 5 guiding principles of Finance?
maximization of wealth - ANSWERthe creation of as much wealth as possible with the
available resources
time value of money - ANSWERthe opportunity cost of tying up funds in projects,
stocks, or other assets
risk - ANSWERinvestors want compensation for time and _______.
return vs risk trade off - ANSWERthe concept that greater risk should be rewarded with
a higher return
low - ANSWERgov't bonds, big firms, saving accounts are examples of ______ risk.
high - ANSWERsmall company stock and junk bonds are examples of _____ risk
leverage - ANSWERthe concept of how much debt a firm issues for its projects
increases risk for shareholders - ANSWERwhy would a stockholder be concerned about
leverage?
diversification - ANSWERthe idea of removing risk from a portfolio of stocks or other
investments
80 - ANSWERroughly ____% of all businesses in US are sole proprietorships.
90 - ANSWERroughly _____% of all business is conducted by corporations.
easy to form, single taxation, less regulation - ANSWER3 advantages to sole
proprietorship
unlimited liability, difficult to raise money, life of business - ANSWER3 disadvantages to
sole proprietorship
easy to form, single taxation - ANSWER2 advantages to partnership
unlimited liability, difficult to raise money, life of business, partnership issues -
ANSWER4 disadvantages to a partnership
QUESTIONS 100% CORRECT.
maximize wealth, time value of money, risk vs return, leverage, diversification -
ANSWERwhat are the 5 guiding principles of Finance?
maximization of wealth - ANSWERthe creation of as much wealth as possible with the
available resources
time value of money - ANSWERthe opportunity cost of tying up funds in projects,
stocks, or other assets
risk - ANSWERinvestors want compensation for time and _______.
return vs risk trade off - ANSWERthe concept that greater risk should be rewarded with
a higher return
low - ANSWERgov't bonds, big firms, saving accounts are examples of ______ risk.
high - ANSWERsmall company stock and junk bonds are examples of _____ risk
leverage - ANSWERthe concept of how much debt a firm issues for its projects
increases risk for shareholders - ANSWERwhy would a stockholder be concerned about
leverage?
diversification - ANSWERthe idea of removing risk from a portfolio of stocks or other
investments
80 - ANSWERroughly ____% of all businesses in US are sole proprietorships.
90 - ANSWERroughly _____% of all business is conducted by corporations.
easy to form, single taxation, less regulation - ANSWER3 advantages to sole
proprietorship
unlimited liability, difficult to raise money, life of business - ANSWER3 disadvantages to
sole proprietorship
easy to form, single taxation - ANSWER2 advantages to partnership
unlimited liability, difficult to raise money, life of business, partnership issues -
ANSWER4 disadvantages to a partnership
