CORPORATE FINANCE FINAL EXAM
ANSWERS | COMPLETE STUDY GUIDE AND
PRACTICE QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Investors buy debt or equity of the Firm with cash: Depends
Financing Decision - how should the firm raise the cash/capital
to pay for the firm's assets?
External finance involves selling a financial claim - why choose
debt or equity?
Debt - a contractual claim entitles investor to receive fixed
interest payments at specified dates
Equity - a residual claim entitles ownership in firm
Who gets "paid" first?
Neither
Debt holders
Equity holders
Depends
Investment Decision - what real assets do we want to Capital Budgeting
purchase with the cash?
Operating Decision - how should the firm use assets in each
period?
What is the most important relationship between Investing and
Operating decisions?
Cash Outflow vs. Cash Inflow
Capital Budgeting
No relationship
Both Firm Decisions
,4a) Firm reinvests cash in the Firm's Operations Depends
4b) Firm pays out cash to investors
Payout Decision - how should the Firm divide up operating
cash flows into cash distributed to investors and cash
reinvested in the firm's operations and assets
Is this a cash inflow or outflow?
Cash Outflow
Cash Inflow
Both
Depends
Firm Manager Objectives: What is the manager's primary Maximize the equity value of the Firm
objective?
Maximize the enterprise value of the Firm
Avoid financial distress and bankruptcy
Maximize Profit
Maximize the equity value of the Firm
4a) Firm reinvests cash in the Firm's Operations Cash Outflow or Neither
4b) Firm pays out cash to investors
Payout Decision - how should the Firm divide up operating
cash flows into cash distributed to investors and cash
reinvested in the firm's operations and assets
Is this a cash inflow or outflow?
Cash Outflow
Cash Outflow or Neither
Cash Inflow
Both
, What are the five key strategic financial decisions that a firm Financing, Investing, Operating, Payout, Liquidity
must make?
Financing, Investing, Operating, Payout, Liquidity
Financing, Capital Budgeting, Payout, Add Liquidity, Draw
Down Liquidity
Financing, Investing, Capital Budgeting, Payout, Liquidity
Capital Structure, Investing, Operating, Payout, Liquidity
Finance Interview Question: How does a $10mm increase in Net Income decreases by $7m, Cash Flow from Operations increases by $3m, Cash is up
Depreciation flow through the three financial statements? $3m, Net PP&E down $10m, Retained Earnings down $7m
Assume 30% tax rate
Net Income decreases by $10m, Cash Flow from Operations
decreases by $10m, Cash is down $10m, Retained Earnings
down $10m
Net Income decreases by $3m, Cash Flow from Operations
increases by $7m, Cash is up $7m, Net PP&E down $10m,
Retained Earnings down $3m
Net Income decreases by $7m, Cash Flow from Operations
increases by $3m, Cash is up $3m, Net PP&E down $10m,
Retained Earnings down $7m
No answer text provided.
Where is Cost of Goods Sold (COGS)? Other Costs of Revenue
Selling and Marketing
Research and Development
Other Costs of Revenue
General and Administrative
ANSWERS | COMPLETE STUDY GUIDE AND
PRACTICE QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Investors buy debt or equity of the Firm with cash: Depends
Financing Decision - how should the firm raise the cash/capital
to pay for the firm's assets?
External finance involves selling a financial claim - why choose
debt or equity?
Debt - a contractual claim entitles investor to receive fixed
interest payments at specified dates
Equity - a residual claim entitles ownership in firm
Who gets "paid" first?
Neither
Debt holders
Equity holders
Depends
Investment Decision - what real assets do we want to Capital Budgeting
purchase with the cash?
Operating Decision - how should the firm use assets in each
period?
What is the most important relationship between Investing and
Operating decisions?
Cash Outflow vs. Cash Inflow
Capital Budgeting
No relationship
Both Firm Decisions
,4a) Firm reinvests cash in the Firm's Operations Depends
4b) Firm pays out cash to investors
Payout Decision - how should the Firm divide up operating
cash flows into cash distributed to investors and cash
reinvested in the firm's operations and assets
Is this a cash inflow or outflow?
Cash Outflow
Cash Inflow
Both
Depends
Firm Manager Objectives: What is the manager's primary Maximize the equity value of the Firm
objective?
Maximize the enterprise value of the Firm
Avoid financial distress and bankruptcy
Maximize Profit
Maximize the equity value of the Firm
4a) Firm reinvests cash in the Firm's Operations Cash Outflow or Neither
4b) Firm pays out cash to investors
Payout Decision - how should the Firm divide up operating
cash flows into cash distributed to investors and cash
reinvested in the firm's operations and assets
Is this a cash inflow or outflow?
Cash Outflow
Cash Outflow or Neither
Cash Inflow
Both
, What are the five key strategic financial decisions that a firm Financing, Investing, Operating, Payout, Liquidity
must make?
Financing, Investing, Operating, Payout, Liquidity
Financing, Capital Budgeting, Payout, Add Liquidity, Draw
Down Liquidity
Financing, Investing, Capital Budgeting, Payout, Liquidity
Capital Structure, Investing, Operating, Payout, Liquidity
Finance Interview Question: How does a $10mm increase in Net Income decreases by $7m, Cash Flow from Operations increases by $3m, Cash is up
Depreciation flow through the three financial statements? $3m, Net PP&E down $10m, Retained Earnings down $7m
Assume 30% tax rate
Net Income decreases by $10m, Cash Flow from Operations
decreases by $10m, Cash is down $10m, Retained Earnings
down $10m
Net Income decreases by $3m, Cash Flow from Operations
increases by $7m, Cash is up $7m, Net PP&E down $10m,
Retained Earnings down $3m
Net Income decreases by $7m, Cash Flow from Operations
increases by $3m, Cash is up $3m, Net PP&E down $10m,
Retained Earnings down $7m
No answer text provided.
Where is Cost of Goods Sold (COGS)? Other Costs of Revenue
Selling and Marketing
Research and Development
Other Costs of Revenue
General and Administrative
