Fundamentals of Corporate Finance (UCLA X) Exam Questions with Correct Answers| New
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Definition of Corporate Finance the study of the relationship between business decisions
and the value of the stock in the business
Capital Budgeting the process of planning and managing a firm's long-term investments
Capital Structure (or Financial Structure) the mixture of long-term debt and equity
maintained by a firm to finance its operations
Working Capital a firm's short-term assets (ie cash, inventory) and liabilities (ie accounts
payable to suppliers)
What is the capital budgeting decision? the acquisition of long-term investments. the value
of the cash flow generated by an asset exceeds the cost of that asset.
Sole Proprietorship business owned by a single individual.
PROs: easy and inexpensive to form, individual retains all profits
CONs: individual has unlimited liability to debt, the organization is limited to the life of the
owner, capital is often limited to owner's personal wealth
Partnership (2 types) business formed by 2 or more individuals or entities.
general: partners receive equal profits and liability
limited: one or more of the partners will be subject to liability, others will be limited but not
actively involved in management. division of profits is relative.
Corporation business created as a distinct legal entity composed of one or more individuals
or entities; a legal "person" separate and distinct from its owners; complicated to form, subject
to taxes
Update with Guaranteed Success
Definition of Corporate Finance the study of the relationship between business decisions
and the value of the stock in the business
Capital Budgeting the process of planning and managing a firm's long-term investments
Capital Structure (or Financial Structure) the mixture of long-term debt and equity
maintained by a firm to finance its operations
Working Capital a firm's short-term assets (ie cash, inventory) and liabilities (ie accounts
payable to suppliers)
What is the capital budgeting decision? the acquisition of long-term investments. the value
of the cash flow generated by an asset exceeds the cost of that asset.
Sole Proprietorship business owned by a single individual.
PROs: easy and inexpensive to form, individual retains all profits
CONs: individual has unlimited liability to debt, the organization is limited to the life of the
owner, capital is often limited to owner's personal wealth
Partnership (2 types) business formed by 2 or more individuals or entities.
general: partners receive equal profits and liability
limited: one or more of the partners will be subject to liability, others will be limited but not
actively involved in management. division of profits is relative.
Corporation business created as a distinct legal entity composed of one or more individuals
or entities; a legal "person" separate and distinct from its owners; complicated to form, subject
to taxes
