Summary Finance Exam 1 (Chapters 1-4) EXAM Latest 2026 (100% Correct Answers)

Finance Exam 1 (Chapters 1-4)
EXAM Latest 2026 (100% Correct
Answers)
4 Basic Areas of Finance - CORRECT ANSWERS Corporate Finance

Financial Institutions

Investments

International Finance



Financial Institutions - CORRECT ANSWERS Companies that specialize in financial matters.

- Banks

- Brokerage Firms

- Insurance Companies



What is involved in the Investments side of Finance? - CORRECT ANSWERS Stocks and Bonds

Valuing Financial Assets



Capital Budgeting Decision - CORRECT ANSWERS What long-term investments should the
business take on?



Capital Structure Decision - CORRECT ANSWERS How should we pay for your assets?

Debt or Equity?



Working Capital Management Decision - CORRECT ANSWERS How do we manage the day-to-
day finances of the firm?

, 3 Forms of Business Organization - CORRECT ANSWERS Sole Proprietorship

Partnership

Corporation



What is the Goal of Financial Management? - CORRECT ANSWERS -Maximize the current
value per share of the companies stock

- Maximize the value of the existing owners' equity



What is the Agency Problem - CORRECT ANSWERS Conflicts between the Principal
(Stockholder) and Agent (Managers)



What is another name for Principal? - CORRECT ANSWERS Stockholder



What is another name for Agent - CORRECT ANSWERS Manager



What is the Balance Sheet? - CORRECT ANSWERS Snapshot of the firms Assets and Liabilities
at any given point



Balance Sheet Identity (Equation) - CORRECT ANSWERS Assets = Liabilities + Shareholders'
Equity



Debt vs. Equity (Equation) - CORRECT ANSWERS Shareholders' Equity = Equity - Liabilities



Net Working Capital - CORRECT ANSWERS Current Assets - Current Liabilities



What is Liquidity? - CORRECT ANSWERS Speed and ease of conversion to CASH