FINA 3770 Final Exam Questions and Answers Latest Update 2025-2026
Agency costs refer to
A) the costs that result from default and bankruptcy of a firm.
stockholders having unreasonable expectations about managerial performance.
B) the costs of any conflicts of interest between stockholders and management
C) the total dividends paid to stockholders over the lifetime of a firm.
D) the costs of any conflicts of interest between stockholders and management
E) the fact that managers know how to manage the firm better than stockholders. - Answers D)
the costs of any conflicts of interest between stockholders and management
Which of the following is primarily responsible for managing all financial aspects of a firm?
External Auditors
Chairman of the board
CFO
CEO
Board of Directors - Answers CFO
Which of the following are the three advantages of a CORPORATION?
limited liability, agency conflicts, double taxation
limited liability, can borrow money easily, easy transfer of ownership
limited liability, can borrow money easily, agency conflicts
unlimited liability, can borrow money easily, double taxation
unlimited liability, can borrow money easily, double taxation - Answers limited liability, can
borrow money easily, easy transfer of ownership
The primary goal for a firm's financial managers is to:
,Maximize the firm's reported net income
Maximize shareholders' wealth by maximizing share price.
Minimize the price of the company's common stock
Maximize the revenue of the firm
Maximize the cost of the firm - Answers Maximize shareholders' wealth by maximizing share
price.
From the owner's perspective, which of the following should be the goal of a firm?
Revenue maximization
All of them
Stockholder's wealth maximization
Tax minimization
Profit maximization - Answers Stockholder's wealth maximization
An important function of the financial system is:
to help state governments to coordinate state tax levies.
to direct money to the best investment opportunities in the economy.
to direct the money from borrower-lenders to lender-savers.
to allow the federal government to view all financial transactions. - Answers to direct money to
the best investment opportunities in the economy.
What is the typical minimum denominated transaction size in the direct financial markets?
$10,000,000.
$10,000.
$100,000.
, $1,000,000. - Answers $1,000,000.
One of the main services offered by investment banks to companies is:
helping companies sell new debt or equity issues in the security markets.
taking deposits from companies.
all of the above.
making loans to companies. - Answers helping companies sell new debt or equity issues in the
security markets.
If your firm obtains most of its financing from commercial banks, then it primarily accesses the
capital markets through:
direct financing.
a legal loophole that allows all commercial banks the ability to underwrite securities.
none of the above.
indirect financing. - Answers indirect financing.
If inflation is anticipated to be 6 percent during the next year, while the real rate of interest for a
one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-
year loan?
6%.
11%.
5%.
12%. - Answers 11%
Which of the following are all items from the balance sheet?
net sales, common stock, retained earnings
net sales, inventories, notes payable
Agency costs refer to
A) the costs that result from default and bankruptcy of a firm.
stockholders having unreasonable expectations about managerial performance.
B) the costs of any conflicts of interest between stockholders and management
C) the total dividends paid to stockholders over the lifetime of a firm.
D) the costs of any conflicts of interest between stockholders and management
E) the fact that managers know how to manage the firm better than stockholders. - Answers D)
the costs of any conflicts of interest between stockholders and management
Which of the following is primarily responsible for managing all financial aspects of a firm?
External Auditors
Chairman of the board
CFO
CEO
Board of Directors - Answers CFO
Which of the following are the three advantages of a CORPORATION?
limited liability, agency conflicts, double taxation
limited liability, can borrow money easily, easy transfer of ownership
limited liability, can borrow money easily, agency conflicts
unlimited liability, can borrow money easily, double taxation
unlimited liability, can borrow money easily, double taxation - Answers limited liability, can
borrow money easily, easy transfer of ownership
The primary goal for a firm's financial managers is to:
,Maximize the firm's reported net income
Maximize shareholders' wealth by maximizing share price.
Minimize the price of the company's common stock
Maximize the revenue of the firm
Maximize the cost of the firm - Answers Maximize shareholders' wealth by maximizing share
price.
From the owner's perspective, which of the following should be the goal of a firm?
Revenue maximization
All of them
Stockholder's wealth maximization
Tax minimization
Profit maximization - Answers Stockholder's wealth maximization
An important function of the financial system is:
to help state governments to coordinate state tax levies.
to direct money to the best investment opportunities in the economy.
to direct the money from borrower-lenders to lender-savers.
to allow the federal government to view all financial transactions. - Answers to direct money to
the best investment opportunities in the economy.
What is the typical minimum denominated transaction size in the direct financial markets?
$10,000,000.
$10,000.
$100,000.
, $1,000,000. - Answers $1,000,000.
One of the main services offered by investment banks to companies is:
helping companies sell new debt or equity issues in the security markets.
taking deposits from companies.
all of the above.
making loans to companies. - Answers helping companies sell new debt or equity issues in the
security markets.
If your firm obtains most of its financing from commercial banks, then it primarily accesses the
capital markets through:
direct financing.
a legal loophole that allows all commercial banks the ability to underwrite securities.
none of the above.
indirect financing. - Answers indirect financing.
If inflation is anticipated to be 6 percent during the next year, while the real rate of interest for a
one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-
year loan?
6%.
11%.
5%.
12%. - Answers 11%
Which of the following are all items from the balance sheet?
net sales, common stock, retained earnings
net sales, inventories, notes payable
