FIN3703 Assignment 1: 100 Questions and
Answers (2025/2026)
Module 1: Introduction to Corporate Finance
1. What is the primary goal of corporate financial management?
A) Maximize market share
B) Maximize the current value of the company's stock
C) Minimize operational costs
D) Maximize executive compensation
2. Which of the following is a capital budgeting decision?
A) Deciding whether to pay a dividend
B) Determining the optimal level of inventory
C) Deciding to open a new manufacturing plant
D) Establishing a terms-of-sale discount for early payment
3. A conflict of interest between a corporation's shareholders and its managers is referred to
as:
A) Corporate breakdown
B) The agency problem
C) Stakeholder dissonance
D) Moral hazard
4. Which financial statement shows a firm's revenues and expenses over a period of time?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Retained Earnings
5. The Sarbanes-Oxley Act (SOX) of 2002 was primarily designed to:
A) Reduce corporate tax rates
B) Increase corporate financial disclosure and prevent fraud
C) Deregulate the financial industry
D) Set international accounting standards
,Module 2: Financial Statements and Cash Flow
6. Net Working Capital is defined as:
A) Total Assets minus Total Liabilities
B) Current Assets minus Current Liabilities
C) Fixed Assets minus Long-Term Debt
D) Cash and Marketable Securities
7. Which of the following is a non-cash expense?
A) Interest Expense
B) Cost of Goods Sold
C) Depreciation
D) Rent Expense
8. The cash flow from assets is also known as the firm's:
A) Free Cash Flow
B) Net Income
C) Operating Cash Flow
D) Working Capital
9. Cash Flow to Creditors is calculated as:
A) Interest Paid minus Net New Borrowing
B) Dividends Paid plus Interest Paid
C) Net New Borrowing
D) Interest Paid plus Net New Equity
10. An increase in accounts receivable represents:
A) A source of cash
B) A use of cash
C) Neither a source nor a use of cash
D) An increase in net income
11. The financial statement that summarizes a firm's financial position at a specific point in
time is the:
A) Income Statement
B) Statement of Retained Earnings
C) Balance Sheet
D) Statement of Cash Flows
12. Earnings Before Interest and Taxes (EBIT) is also known as:
A) Net Income
, B) Gross Profit
C) Operating Income
D) Free Cash Flow
13. If a company issues new long-term debt, this is considered a:
A) Cash inflow from financing activities
B) Cash outflow from financing activities
C) Cash inflow from investing activities
D) Cash outflow from operating activities
14. The change in Retained Earnings from one period to the next is equal to:
A) Net Income minus Dividends Paid
B) Net Income plus Dividends Paid
C) Revenue minus Expenses
D) Cash Flow from Assets
15. The purchase of a new factory is considered a:
A) Cash outflow from financing activities
B) Cash outflow from investing activities
C) Cash outflow from operating activities
D) Source of cash
Module 3: Financial Markets and NPV
16. The sale of shares of stock in a public market for the first time is called a(n):
A) Secondary Offering
B) Initial Public Offering (IPO)
C) Private Placement
D) Seasoned Equity Offering
17. The market where existing securities are traded among investors is the:
A) Primary Market
B) Secondary Market
C) Tertiary Market
D) Dealer Market
18. The fundamental value of a financial asset is based on the:
A) Historical cost of the asset
B) Present value of its future cash flows
Answers (2025/2026)
Module 1: Introduction to Corporate Finance
1. What is the primary goal of corporate financial management?
A) Maximize market share
B) Maximize the current value of the company's stock
C) Minimize operational costs
D) Maximize executive compensation
2. Which of the following is a capital budgeting decision?
A) Deciding whether to pay a dividend
B) Determining the optimal level of inventory
C) Deciding to open a new manufacturing plant
D) Establishing a terms-of-sale discount for early payment
3. A conflict of interest between a corporation's shareholders and its managers is referred to
as:
A) Corporate breakdown
B) The agency problem
C) Stakeholder dissonance
D) Moral hazard
4. Which financial statement shows a firm's revenues and expenses over a period of time?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Retained Earnings
5. The Sarbanes-Oxley Act (SOX) of 2002 was primarily designed to:
A) Reduce corporate tax rates
B) Increase corporate financial disclosure and prevent fraud
C) Deregulate the financial industry
D) Set international accounting standards
,Module 2: Financial Statements and Cash Flow
6. Net Working Capital is defined as:
A) Total Assets minus Total Liabilities
B) Current Assets minus Current Liabilities
C) Fixed Assets minus Long-Term Debt
D) Cash and Marketable Securities
7. Which of the following is a non-cash expense?
A) Interest Expense
B) Cost of Goods Sold
C) Depreciation
D) Rent Expense
8. The cash flow from assets is also known as the firm's:
A) Free Cash Flow
B) Net Income
C) Operating Cash Flow
D) Working Capital
9. Cash Flow to Creditors is calculated as:
A) Interest Paid minus Net New Borrowing
B) Dividends Paid plus Interest Paid
C) Net New Borrowing
D) Interest Paid plus Net New Equity
10. An increase in accounts receivable represents:
A) A source of cash
B) A use of cash
C) Neither a source nor a use of cash
D) An increase in net income
11. The financial statement that summarizes a firm's financial position at a specific point in
time is the:
A) Income Statement
B) Statement of Retained Earnings
C) Balance Sheet
D) Statement of Cash Flows
12. Earnings Before Interest and Taxes (EBIT) is also known as:
A) Net Income
, B) Gross Profit
C) Operating Income
D) Free Cash Flow
13. If a company issues new long-term debt, this is considered a:
A) Cash inflow from financing activities
B) Cash outflow from financing activities
C) Cash inflow from investing activities
D) Cash outflow from operating activities
14. The change in Retained Earnings from one period to the next is equal to:
A) Net Income minus Dividends Paid
B) Net Income plus Dividends Paid
C) Revenue minus Expenses
D) Cash Flow from Assets
15. The purchase of a new factory is considered a:
A) Cash outflow from financing activities
B) Cash outflow from investing activities
C) Cash outflow from operating activities
D) Source of cash
Module 3: Financial Markets and NPV
16. The sale of shares of stock in a public market for the first time is called a(n):
A) Secondary Offering
B) Initial Public Offering (IPO)
C) Private Placement
D) Seasoned Equity Offering
17. The market where existing securities are traded among investors is the:
A) Primary Market
B) Secondary Market
C) Tertiary Market
D) Dealer Market
18. The fundamental value of a financial asset is based on the:
A) Historical cost of the asset
B) Present value of its future cash flows
