FIN 300 EXAM 1 "STUDY GUIDE" TSARSIS QUESTIONS WELL ANSWERED LATEST UPDATE 2026

FIN 300 EXAM 1 "STUDY GUIDE" TSARSIS QUESTIONS WELL ANSWERED LATEST UPDATE 2026 Role of Financial Manager - Answers Make decisions on behalf of the firm's investors For good decisions, the benefits exceed the costs Stakeholder Theory - Answers A theory that holds that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm's operation Capital Budgeting - Answers the process of analyzing the needs of the business and selecting the assets that will maximize its value Financing decision/Capital structure decision - Answers How will the company obtain investment capital to obtain its productive assets? Financing Decision - Answers How a firm builds the liability and equity side of the balance sheet to finance its investments. Whether the firm chooses to finance (pay) for its assets through using debt, or issuing equity. equity - Answers ownership of assets that may have debts or other liabilities attached to them Goal of the firm - Answers maximize profit Agency Conflict - Answers the possibility of conflict of interest between the stockholders and management of a firm Agency Relationship - Answers relationship between stockholders and management Alignment of goals of shareholders to managers - Answers Sarbanes-Oxley Act (SOX) - Answers Regulations passed by Congress to reduce unethical corporate behavior. FED - Answers the Federal Reserve System (the nation's central banking organization) FED goals - Answers 1) Maximum Employment 2) Price Stability 3) Financial Market Stability FED tools - Answers open market operations, discount rate, reserve requirement open market operations - Answers the buying and selling of government securities to change the supply of money discount rate - Answers rate the Federal Reserve charges for loans to commercial banks Reserve Requirements (RR) - Answers - affect how much money banks can create by making loans - the fraction of deposits banks must hold in the vault or on deposit at the FED Financial Markets - Answers markets where financial securities, such as stocks and bonds, are bought and sold Primary markets versus secondary markets - Answers -Primary markets are the markets in which corporations raise new capital. The corporation selling a newly created stock receives the proceeds from the sale in a primary market transaction (Business/Gov to Investor) -Secondary markets are markets in which existing, previously issued securities are traded among investors. (investor to investor) EMH (efficient market hypothesis) - Answers Theory describing the behavior of an assumed "perfect" market in which (1) securities are in equilibrium, (2) security prices fully reflect all available information and react swiftly to new information, and (3), because stocks are fully and fairly priced, investors need not waste time looking for mispriced securities. Securities - Answers stocks and bonds real versus nominal interest rates - Answers - a nominal interest rate makes no allowance for inflation - the real interest rate is the amount of extra purchasing power a lender must be paid for the rental of his/her money --- the ex ante real interest rate is adjusted for expected changes in the price level ---the ex post real interest rate is adjusted for actual changes in the price level Fisher Equation - Answers states that the real interest rate equals the nominal interest rate minus the inflation rate real interest rate = nominal interest rate - inflation rate nominal interest rate = real interest rate + inflation rate real interest rate formula - Answers = nominal interest rate - inflation rate nominal interest rate formula - Answers = real interest rate + inflation rate Annual report - Answers a yearly statement of the financial condition, progress, and expectations of an organization annual report includes - Answers 1. Financial statements. 2. Management discussion and analysis. 3. Notes to the financial statements. 4. Auditor's report. balance sheet - Answers A financial statement that reports assets, liabilities, and owner's equity on a specific date. income statement - Answers A financial statement showing the revenue and expenses for a fiscal period. RE statement - Answers • The revision and publication of one or more of a company's previous financial statements • Necessary when it is determined that a previous statement contains a material inaccuracy • Company must file a form 8-K within four days to notify investors of non-reliance on previously issued financial statements Beg RE + NI -Dividends End RE Statement of Cash Flows - Answers A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time. Statement of Cash Flows Equation - Answers Cash flows from operating activities + cash flows from investing activities + cash flows from financing activities = change in cash CFO +/- CFI +/- CFF = Change in Cash current assets - Answers cash and other assets expected to be exchanged for cash or consumed within a year current liabilities - Answers debts of the business that must be paid within the next accounting period Current Ratio Formula - Answers = current assets/current liabilities net working capital formula - Answers = current assets - current liabilities Current Ratio Definition - Answers measures a company's ability to repay debt in the short term Treasury Stock - Answers A corporation's own stock that has been reacquired by the corporation and is being held for future use (later reaquired)