FINANCIAL MANAGEMENT EXAM 1
(CHAPTERS 1-6) QUESTIONS AND ANSWERS
100% CORRECT!!
, four basic areas of finance - ANSWER 1. corporate finance
2. investments
3. financial institutions
4. international finance
identify and describe types of financial management decisions - ANSWER - capital
budgeting = planning and managing LT investments
- capital structure = mixture of debt to equity %
- working capital management = ST assets and L
sole proprietorship - ANSWER least regulated, unlimited liability, advantage is tax
treatment
partnership - ANSWER 2+ people, can be general partnerships or limited partnerships,
easy and inexpensive to form, unlimited liability for business debts on part of the
owners, limited life of business, difficulty of transferring ownership
corporation - ANSWER separate legal entity, separate taxable entity, bylaws, double
taxation (corporate and personal level)
goals of financial management in a corporation - ANSWER maximize profits
Sarbanes-Oxley Act - ANSWER 2002, oversees and regulates accounting fraud in
financial statements
issues with agency relationship - ANSWER conflicts of interest between owners and
management
define stakeholder - ANSWER not a stockholder or creditor, has a claim on cash flows
of a firm
distinguish between primary and secondary markets - ANSWER primary = corporation
is the seller
secondary = one owner/creditor selling to another
balance sheet: purpose and description - ANSWER financial position of company at
certain point of time
(CHAPTERS 1-6) QUESTIONS AND ANSWERS
100% CORRECT!!
, four basic areas of finance - ANSWER 1. corporate finance
2. investments
3. financial institutions
4. international finance
identify and describe types of financial management decisions - ANSWER - capital
budgeting = planning and managing LT investments
- capital structure = mixture of debt to equity %
- working capital management = ST assets and L
sole proprietorship - ANSWER least regulated, unlimited liability, advantage is tax
treatment
partnership - ANSWER 2+ people, can be general partnerships or limited partnerships,
easy and inexpensive to form, unlimited liability for business debts on part of the
owners, limited life of business, difficulty of transferring ownership
corporation - ANSWER separate legal entity, separate taxable entity, bylaws, double
taxation (corporate and personal level)
goals of financial management in a corporation - ANSWER maximize profits
Sarbanes-Oxley Act - ANSWER 2002, oversees and regulates accounting fraud in
financial statements
issues with agency relationship - ANSWER conflicts of interest between owners and
management
define stakeholder - ANSWER not a stockholder or creditor, has a claim on cash flows
of a firm
distinguish between primary and secondary markets - ANSWER primary = corporation
is the seller
secondary = one owner/creditor selling to another
balance sheet: purpose and description - ANSWER financial position of company at
certain point of time
