FUNDAMENTALS OF CORPORATE FINANCE
11TH CANADIAN EDITION COMPREHENSIVE
EXAM SCRIPT WITH SOLUTIONS
◉ llimited liability.
Answer: the owners of a corp are not personally liable for
obligations of the corp- but can still be sued for personal decisions
◉ cfo.
Answer: chief financial officer-leader, the most important
leads financial decisions and execution
oversees offices of treasurer, controller
Oversees whole financial staff
Close contact with CEO, other senior execs
Key external voice for corporation
◉ treasurer.
Answer: responsible for financing, cash management, and
relationshp with banks and other instit. internal/external manage.
,◉ controller.
Answer: internal statements- responsible for budgeting, taxes, and
accounting
◉ oppurtunity cost of capital.
Answer: minimum acceptable rate of return on capital investment-
the rate of return that investions could earn in finance. markets, look
at proj. of similar risk, return
◉ agency problems.
Answer: managers are agents for shareholders, but the managers
may act in their own interest
◉ stakeholder.
Answer: anyone with a financial interest in the firm
◉ financial market.
Answer: market where securities are issued and traded
◉ primary market.
Answer: market for the sale of new securities by corporations, A
financial market in which new issues of a security are sold to initial
buyers.
, ◉ secondary market.
Answer: market in which previously issued securities are traded
amond investors, Exchanges and over-the-counter markets where
securities are bought and sold after original issuance. Proceeds of
secondary market sales go to the selling investors, not to the
companies that originally issued the securities.
NYSE, NASDAQ
Specialist system vs. dealer systems
Are intermediaries valuable? Peake-Mendelson proposals 1980s
Trading pits vs. electronic exchanges in derivatives markets
◉ fixed income market.
Answer: market for longer-term financing
◉ capital market.
Answer: Market in which money is lent for periods longer than a
year.
11TH CANADIAN EDITION COMPREHENSIVE
EXAM SCRIPT WITH SOLUTIONS
◉ llimited liability.
Answer: the owners of a corp are not personally liable for
obligations of the corp- but can still be sued for personal decisions
◉ cfo.
Answer: chief financial officer-leader, the most important
leads financial decisions and execution
oversees offices of treasurer, controller
Oversees whole financial staff
Close contact with CEO, other senior execs
Key external voice for corporation
◉ treasurer.
Answer: responsible for financing, cash management, and
relationshp with banks and other instit. internal/external manage.
,◉ controller.
Answer: internal statements- responsible for budgeting, taxes, and
accounting
◉ oppurtunity cost of capital.
Answer: minimum acceptable rate of return on capital investment-
the rate of return that investions could earn in finance. markets, look
at proj. of similar risk, return
◉ agency problems.
Answer: managers are agents for shareholders, but the managers
may act in their own interest
◉ stakeholder.
Answer: anyone with a financial interest in the firm
◉ financial market.
Answer: market where securities are issued and traded
◉ primary market.
Answer: market for the sale of new securities by corporations, A
financial market in which new issues of a security are sold to initial
buyers.
, ◉ secondary market.
Answer: market in which previously issued securities are traded
amond investors, Exchanges and over-the-counter markets where
securities are bought and sold after original issuance. Proceeds of
secondary market sales go to the selling investors, not to the
companies that originally issued the securities.
NYSE, NASDAQ
Specialist system vs. dealer systems
Are intermediaries valuable? Peake-Mendelson proposals 1980s
Trading pits vs. electronic exchanges in derivatives markets
◉ fixed income market.
Answer: market for longer-term financing
◉ capital market.
Answer: Market in which money is lent for periods longer than a
year.
