FINA 3313 EXAM 1 FLR QUIZ REVIEW QUESTIONS WITH CORRECT ANSWERS LATEST
UPDATE 2025/2026
Finance is the art and science of managing money - Answers True
Who is the financial manager? - Answers Anyone whose decisions affect the cash flows of the
firm
What are the advantages of the corporate form of business organization? - Answers -Perpetual
life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally liable for all of its debts -
owners can only lose the lessor of the value of their investment or $100,000 - Answers False
Shareholders get any assets or cash flows of the corporation that remain after all other debts
have been paid. - Answers True
We can think of equity as a geree of ownership in any asset after subtracting all debts
associated with that asset. Shareholder equity is calculated as Total __________ minus Total
Liabilites - Answers Assets
By law, the board of directors make decisions as fiduciary on behalf of company executives -
Answers False
The board makes decisions concerning the hiring and firing of personnel, dividend policies and
payouts, and executive compensation. - Answers True
The separation of ownership (shareholders) and control (managers) in larger corporations with
many shareholders can lead to conflicts of interest between managers and owners. - Answers
True
Amazon and Walmart are examples of corporations because - Answers they are controlled by
managers acting as agents for shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several equivalent ways (select
all correct answers) - Answers -Maximizing shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price because (check all correct)
, - Answers -Timing is important - the receipt of funds sooner rather than later is preferred. Time
is money!
-Profit maximization fails to account for risk - extremely profitable opportunities may be too
risky
-Profits do not necessarily result in cash flows available to stockholders. There is a difference in
accounting values and cash flows.
Shareholders are also known as the residual owners of the firm's cash flows - they only get paid
after other stakeholders are content. - Answers False
Once a firm decided to accept a project, then the financial manager must decide where to get
the money to pay for the project. Funding for a project can be simplified from - Answers -Debt
-Equity
The difference between ____ and ____ is referred to as Net Working Capital - Answers -Short
term assets/short-term liabilites
Why fo firms need the financial system? - Answers -to obtain long term funds
-to facilitate short term cash management policies
-accommodate near term cash inflows and outflows
What is the hurdle rate? - Answers the cost of financing
Financial institutions are intermediaries that channel the savings of individuals, businesses, and
governments into loans or investments. - Answers True
Investment bank make loans that individuals and businesses use to buy goods or expand
business operations, which in turn leads to more deposited funds that make their way to bank -
Answers Flase
The capital market is where firms obtain external short term financing. - Answers False
The shadow banking system has escaped regulation primarily because it does not accept
traditional bank deposits. As a result, many of the shadow banking institutions have been able
to employ higher market, credit and liquidity risks, and have higher capital requirements. -
Answers Flase
From investors perspective, the role of capital markets is to be an efficient market that allocates
funds to their most productive uses. - Answers True
A liquid market- - Answers has many available buyers and sellers and comparatively low
transaction costs
UPDATE 2025/2026
Finance is the art and science of managing money - Answers True
Who is the financial manager? - Answers Anyone whose decisions affect the cash flows of the
firm
What are the advantages of the corporate form of business organization? - Answers -Perpetual
life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally liable for all of its debts -
owners can only lose the lessor of the value of their investment or $100,000 - Answers False
Shareholders get any assets or cash flows of the corporation that remain after all other debts
have been paid. - Answers True
We can think of equity as a geree of ownership in any asset after subtracting all debts
associated with that asset. Shareholder equity is calculated as Total __________ minus Total
Liabilites - Answers Assets
By law, the board of directors make decisions as fiduciary on behalf of company executives -
Answers False
The board makes decisions concerning the hiring and firing of personnel, dividend policies and
payouts, and executive compensation. - Answers True
The separation of ownership (shareholders) and control (managers) in larger corporations with
many shareholders can lead to conflicts of interest between managers and owners. - Answers
True
Amazon and Walmart are examples of corporations because - Answers they are controlled by
managers acting as agents for shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several equivalent ways (select
all correct answers) - Answers -Maximizing shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price because (check all correct)
, - Answers -Timing is important - the receipt of funds sooner rather than later is preferred. Time
is money!
-Profit maximization fails to account for risk - extremely profitable opportunities may be too
risky
-Profits do not necessarily result in cash flows available to stockholders. There is a difference in
accounting values and cash flows.
Shareholders are also known as the residual owners of the firm's cash flows - they only get paid
after other stakeholders are content. - Answers False
Once a firm decided to accept a project, then the financial manager must decide where to get
the money to pay for the project. Funding for a project can be simplified from - Answers -Debt
-Equity
The difference between ____ and ____ is referred to as Net Working Capital - Answers -Short
term assets/short-term liabilites
Why fo firms need the financial system? - Answers -to obtain long term funds
-to facilitate short term cash management policies
-accommodate near term cash inflows and outflows
What is the hurdle rate? - Answers the cost of financing
Financial institutions are intermediaries that channel the savings of individuals, businesses, and
governments into loans or investments. - Answers True
Investment bank make loans that individuals and businesses use to buy goods or expand
business operations, which in turn leads to more deposited funds that make their way to bank -
Answers Flase
The capital market is where firms obtain external short term financing. - Answers False
The shadow banking system has escaped regulation primarily because it does not accept
traditional bank deposits. As a result, many of the shadow banking institutions have been able
to employ higher market, credit and liquidity risks, and have higher capital requirements. -
Answers Flase
From investors perspective, the role of capital markets is to be an efficient market that allocates
funds to their most productive uses. - Answers True
A liquid market- - Answers has many available buyers and sellers and comparatively low
transaction costs
