FIN 201 EXAM QUESTIONS ANSWERED CORRECT ANSWERS LATEST UPDATE 2026
Three types of finance - Answers personal, corperate, public
Goal of the firm - Answers maximize shareholders wealth
firms values consider - Answers cash flows, timing of cash flows, risk
duties of financial managers - Answers measure performance, forecast future results, recommend
investments, obtain financing, determine best debt/ equity mix
Three major decisions - Answers capital budgeting, capital structure, working capital management
capital budgeting - Answers what companies should the company invest in
capital structure - Answers how should the company finance itself
working capital management - Answers managing short-term assets and liabilities
Agency problem - Answers managers may act in their own interest instead of shareholders' interests
Three types of data - Answers accounting data, non accounting data (econ), sustainability data
(social, goverance, social)
types of costs - Answers fixed, variable, sunk costs, opportunity costs
cash flow vs accrual - Answers actual money, accounting estimates and rules
finance prefers - Answers cash flows
Ratio analysis: five categories: - Answers liquitity, profitability, asset management,
Annuity - Answers equal payments over time
Ordinary Annuity - Answers payments at the end of the period
annuity DUE - Answers payments at the beginning of the period
Perpetuity - Answers payments forever
interest rates - Answers nominal (quoted rate), effective annual rate (, actual annual rate after
compounding, (ear is always higher than nominal if compounded more than once a year)
more frequent compounding = higher FV (future value) - Answers annual, semi- annual, quarterly,
monthly, daily,
financial system purpose - Answers move money from- surplus units (savers) to deficit units
(borrowers)
debt - Answers loan- must repay, ex. interest on bank loan
equity - Answers ownership- ex. common stock
money markets - Answers short-term debt securities that mature in one year or less
capital markets - Answers long term securities that mature in a year or more
primary market - Answers new securities issued
secondary market - Answers existing securities traded
IPO - Answers First time a company sells stock to the public
Bonds - Answers face value, coupon rate, maturity
bond ratings: investment grade - Answers safer, lower interest rates
junk bonds - Answers riskier, higher yeilds
types of stock: common - Answers voting rights, dividends, capital gains, care about future of
company
prefered stock - Answers usually no voting rights, fixed dividends, priority over common stock
financial institutions - Answers commercial banks, investment banks, credit unions, pension funds,
mutual funds, ETF, hedge funds, insurance companies
FV - Answers = PV (1+ r)^n
PV - Answers = FV/ (1+ r) ^n
Three types of finance - Answers personal, corperate, public
Goal of the firm - Answers maximize shareholders wealth
firms values consider - Answers cash flows, timing of cash flows, risk
duties of financial managers - Answers measure performance, forecast future results, recommend
investments, obtain financing, determine best debt/ equity mix
Three major decisions - Answers capital budgeting, capital structure, working capital management
capital budgeting - Answers what companies should the company invest in
capital structure - Answers how should the company finance itself
working capital management - Answers managing short-term assets and liabilities
Agency problem - Answers managers may act in their own interest instead of shareholders' interests
Three types of data - Answers accounting data, non accounting data (econ), sustainability data
(social, goverance, social)
types of costs - Answers fixed, variable, sunk costs, opportunity costs
cash flow vs accrual - Answers actual money, accounting estimates and rules
finance prefers - Answers cash flows
Ratio analysis: five categories: - Answers liquitity, profitability, asset management,
Annuity - Answers equal payments over time
Ordinary Annuity - Answers payments at the end of the period
annuity DUE - Answers payments at the beginning of the period
Perpetuity - Answers payments forever
interest rates - Answers nominal (quoted rate), effective annual rate (, actual annual rate after
compounding, (ear is always higher than nominal if compounded more than once a year)
more frequent compounding = higher FV (future value) - Answers annual, semi- annual, quarterly,
monthly, daily,
financial system purpose - Answers move money from- surplus units (savers) to deficit units
(borrowers)
debt - Answers loan- must repay, ex. interest on bank loan
equity - Answers ownership- ex. common stock
money markets - Answers short-term debt securities that mature in one year or less
capital markets - Answers long term securities that mature in a year or more
primary market - Answers new securities issued
secondary market - Answers existing securities traded
IPO - Answers First time a company sells stock to the public
Bonds - Answers face value, coupon rate, maturity
bond ratings: investment grade - Answers safer, lower interest rates
junk bonds - Answers riskier, higher yeilds
types of stock: common - Answers voting rights, dividends, capital gains, care about future of
company
prefered stock - Answers usually no voting rights, fixed dividends, priority over common stock
financial institutions - Answers commercial banks, investment banks, credit unions, pension funds,
mutual funds, ETF, hedge funds, insurance companies
FV - Answers = PV (1+ r)^n
PV - Answers = FV/ (1+ r) ^n
