BFIN 300 Midterm Exam Questions With
Correct Answers
Capital Budgeting - CORRECT ANSWER✔✔-The identification of investing
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opportunities that are worth more to the business today than they cost to
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acquire.
Capital Structure Process Decisions - CORRECT ANSWER✔✔-Financing decisions,
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are we going to use l/t debt vs s/t debt, are we going to use debt v equity, how
| | | | | | | | | | | | | | | | | | |
much do we need to borrow? Cost of borrowings, and how and where to raise
| | | | | | | | | | | | | | |
the money. Decision of one financial structure over another is at the heart
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Working capital management - CORRECT ANSWER✔✔-Managing short term
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assets and short term liabilities. E.G. Checking account, cash coming in v. monthly
| | | | | | | | | | | |
payments. Ensures that the business has sufficient cash or liquidity to run
| | | | | | | | | | | | |
without interruption. |
Forms of business - CORRECT ANSWER✔✔-sole proprietorship, partnership,
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corporation
Sole Proprietorship - CORRECT ANSWER✔✔-a business owned by one person.
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Simplest form of business there is, owner takes all liability. (unlimited) E.G. Lawn
| | | | | | | | | | | | |
mowing business |
,Partnership - CORRECT ANSWER✔✔-similar to sole proprietorship, but you have
| | | | | | | | | |
two or more people.
| | |
General Partnership - CORRECT ANSWER✔✔-partnership in which partners share
| | | | | | | | |
equally in both responsibility and liability
| | | | |
limited partnership - CORRECT ANSWER✔✔-form of partnership where one or
| | | | | | | | | |
more partners are not active in the daily running of the business, and whose
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liability for the partnership's debt is restricted to the amount invested in the
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business
Corporation - CORRECT ANSWER✔✔-a business that is separate and distinct from
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its shareholders, considered a legal person.
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double taxation - CORRECT ANSWER✔✔-taxation of dividends both as corporate
| | | | | | | | | |
profit and as personal income
| | | |
Goals of Financial Management - CORRECT ANSWER✔✔-maximize shareholder
| | | | | | | |
value. The goal is learning how to identify investments and arrangements that
| | | | | | | | | | | |
positively affect share prices. | | |
Corporate Finance - CORRECT ANSWER✔✔-the study of the relationship between
| | | | | | | | |
business decisions and maximizing the value of the business
| | | | | | | | |
Sarbanes-Oxley Act - CORRECT ANSWER✔✔-enacted by congress, requires each| | | | | | | | |
public company to provide an assessment of their internal controls and their
| | | | | | | | | | | |
, financial reporting. Requires independent auditor to manage the assessment.
| | | | | | | | |
Auditor must sign off on internal controls.
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Agency Relationship - CORRECT ANSWER✔✔-relationship between stockholders
| | | | | | |
and management
|
proxy fight - CORRECT ANSWER✔✔-an attempt by a person or group to gain
| | | | | | | | | | | | |
control of a firm by getting it stockholders to grant that person or group the
| | | | | | | | | | | | | | |
authority to vote its shares to replace the current management
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Stakeholder - CORRECT ANSWER✔✔-someone who potentially has a claim on the
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cash flows of a company. Includes creditors, shareholders, employees, customers,
| | | | | | | | | |
suppliers, etc.
| |
primary market - CORRECT ANSWER✔✔-the market in which new securities are
| | | | | | | | | | |
originally sold to investors | | |
secondary market - CORRECT ANSWER✔✔-the market in which previously issued
| | | | | | | | | |
securities are traded among investors | | | |
dealer - CORRECT ANSWER✔✔-an agent who buys and sells securities from
| | | | | | | | | | |
inventory
Broker - CORRECT ANSWER✔✔-agents that sell bonds and other securities on
| | | | | | | | | | |
behalf of their clients.
| | |
Correct Answers
Capital Budgeting - CORRECT ANSWER✔✔-The identification of investing
| | | | | | | |
opportunities that are worth more to the business today than they cost to
| | | | | | | | | | | | |
acquire.
Capital Structure Process Decisions - CORRECT ANSWER✔✔-Financing decisions,
| | | | | | | |
are we going to use l/t debt vs s/t debt, are we going to use debt v equity, how
| | | | | | | | | | | | | | | | | | |
much do we need to borrow? Cost of borrowings, and how and where to raise
| | | | | | | | | | | | | | |
the money. Decision of one financial structure over another is at the heart
| | | | | | | | | | | |
Working capital management - CORRECT ANSWER✔✔-Managing short term
| | | | | | | |
assets and short term liabilities. E.G. Checking account, cash coming in v. monthly
| | | | | | | | | | | |
payments. Ensures that the business has sufficient cash or liquidity to run
| | | | | | | | | | | | |
without interruption. |
Forms of business - CORRECT ANSWER✔✔-sole proprietorship, partnership,
| | | | | | | |
corporation
Sole Proprietorship - CORRECT ANSWER✔✔-a business owned by one person.
| | | | | | | | | |
Simplest form of business there is, owner takes all liability. (unlimited) E.G. Lawn
| | | | | | | | | | | | |
mowing business |
,Partnership - CORRECT ANSWER✔✔-similar to sole proprietorship, but you have
| | | | | | | | | |
two or more people.
| | |
General Partnership - CORRECT ANSWER✔✔-partnership in which partners share
| | | | | | | | |
equally in both responsibility and liability
| | | | |
limited partnership - CORRECT ANSWER✔✔-form of partnership where one or
| | | | | | | | | |
more partners are not active in the daily running of the business, and whose
| | | | | | | | | | | | | |
liability for the partnership's debt is restricted to the amount invested in the
| | | | | | | | | | | | |
business
Corporation - CORRECT ANSWER✔✔-a business that is separate and distinct from
| | | | | | | | | |
its shareholders, considered a legal person.
| | | | | |
double taxation - CORRECT ANSWER✔✔-taxation of dividends both as corporate
| | | | | | | | | |
profit and as personal income
| | | |
Goals of Financial Management - CORRECT ANSWER✔✔-maximize shareholder
| | | | | | | |
value. The goal is learning how to identify investments and arrangements that
| | | | | | | | | | | |
positively affect share prices. | | |
Corporate Finance - CORRECT ANSWER✔✔-the study of the relationship between
| | | | | | | | |
business decisions and maximizing the value of the business
| | | | | | | | |
Sarbanes-Oxley Act - CORRECT ANSWER✔✔-enacted by congress, requires each| | | | | | | | |
public company to provide an assessment of their internal controls and their
| | | | | | | | | | | |
, financial reporting. Requires independent auditor to manage the assessment.
| | | | | | | | |
Auditor must sign off on internal controls.
| | | | | |
Agency Relationship - CORRECT ANSWER✔✔-relationship between stockholders
| | | | | | |
and management
|
proxy fight - CORRECT ANSWER✔✔-an attempt by a person or group to gain
| | | | | | | | | | | | |
control of a firm by getting it stockholders to grant that person or group the
| | | | | | | | | | | | | | |
authority to vote its shares to replace the current management
| | | | | | | | |
Stakeholder - CORRECT ANSWER✔✔-someone who potentially has a claim on the
| | | | | | | | | |
cash flows of a company. Includes creditors, shareholders, employees, customers,
| | | | | | | | | |
suppliers, etc.
| |
primary market - CORRECT ANSWER✔✔-the market in which new securities are
| | | | | | | | | | |
originally sold to investors | | |
secondary market - CORRECT ANSWER✔✔-the market in which previously issued
| | | | | | | | | |
securities are traded among investors | | | |
dealer - CORRECT ANSWER✔✔-an agent who buys and sells securities from
| | | | | | | | | | |
inventory
Broker - CORRECT ANSWER✔✔-agents that sell bonds and other securities on
| | | | | | | | | | |
behalf of their clients.
| | |
