CORPORATE FINANCE CHAPTERS 1 & 2
QUESTIONS AND ANSWERS UPDATED 2024 - 25
Capital,Budgeting,,,ANS,-The,process,of,planning,and,managing,a,firms,long,term,investments.
Capital,Structure,,,ANS,-The,mixture,of,debt,and,equity,maintained,by,a,firm.
Working,Capital,,,ANS,-A,firms,short,term,assets,and,liabilities.
Sole,Proprietorship,,,ANS,-A,business,owned,by,a,single,individual.
Partnership,,,ANS,-A,business,formed,by,two,or,more,individuals.
Corporation,,,ANS,-
A,business,created,as,a,distinct,legal,entity,owned,by,one,or,more,individuals,or,entities.
The,goal,of,financial,management,is,to,,,ANS,-
maximize,the,current,value,per,share,of,the,existing,stock,or,to,maximize,the,market,value,of,the,existing
,owners,equity.
Agency,Problem,,,ANS,-
The,possibility,of,conflict,of,interest,between,the,owners,and,management,of,a,firm.
Stakeholder,,,ANS,-
Someone,other,than,a,stockholder,or,creditor,who,potentially,has,a,claim,on,the,cash,flows,of,the,firm.
What,are,the,thee,types,of,financial,management,decisions?,,,ANS,-1.,Capital,budgeting.
2.,Capital,structure.
3.,Working,capital.
, What,are,four,primary,disadvantages,to,the,sole,proprietorship,and,partnership,forms,of,business?,,,ANS,
-1.,Owner,has,unlimited,liability,for,business,debts.,
2.,Life,span,is,limited,to,owners,life,span.
3.,Amount,of,equity,that,can,be,raised,is,limited,to,the,proprietors,personal,wealth.
4.,Ownership,is,difficult,to,transfer.
What,are,four,advantages,to,the,sole,proprietorship,and,partnership,forms,of,business?,,,ANS,-
1.,Simplest,type,of,business,to,start.
2.,Least,regulated.
3.,Owner,keeps,all,profits.
4.,No,double,taxation.
What,goal,should,always,motivate,the,actions,of,the,firms,financial,manager?,,,ANS,-
The,goal,of,financial,management,is,to,maximize,the,current,value,per,share,of,the,existing,stock.
Balance,Sheet,,,ANS,-Financial,statement,showing,a,firms,accounting,value,on,a,particular,date.
Assets,are,classified,as,either,,,ANS,-current,or,fixed.
A,current,asset,has,a,life,of,,,ANS,-less,than,one,year.
Liabilities,are,classified,as,either,,,ANS,-current,or,long,term.
Net,working,capital,,,ANS,-
Current,assets,less,current,liabilities.,It,is,the,difference,between,a,firms,current,assets,and,its,current,lia
bilities.
Liquidity,refers,to,,,ANS,-
the,speed,and,ease,with,which,an,asset,can,be,converted,to,cash.,Liquidity,has,two,dimensions:,ease,of,c
onversion,and,loss,of,value.
QUESTIONS AND ANSWERS UPDATED 2024 - 25
Capital,Budgeting,,,ANS,-The,process,of,planning,and,managing,a,firms,long,term,investments.
Capital,Structure,,,ANS,-The,mixture,of,debt,and,equity,maintained,by,a,firm.
Working,Capital,,,ANS,-A,firms,short,term,assets,and,liabilities.
Sole,Proprietorship,,,ANS,-A,business,owned,by,a,single,individual.
Partnership,,,ANS,-A,business,formed,by,two,or,more,individuals.
Corporation,,,ANS,-
A,business,created,as,a,distinct,legal,entity,owned,by,one,or,more,individuals,or,entities.
The,goal,of,financial,management,is,to,,,ANS,-
maximize,the,current,value,per,share,of,the,existing,stock,or,to,maximize,the,market,value,of,the,existing
,owners,equity.
Agency,Problem,,,ANS,-
The,possibility,of,conflict,of,interest,between,the,owners,and,management,of,a,firm.
Stakeholder,,,ANS,-
Someone,other,than,a,stockholder,or,creditor,who,potentially,has,a,claim,on,the,cash,flows,of,the,firm.
What,are,the,thee,types,of,financial,management,decisions?,,,ANS,-1.,Capital,budgeting.
2.,Capital,structure.
3.,Working,capital.
, What,are,four,primary,disadvantages,to,the,sole,proprietorship,and,partnership,forms,of,business?,,,ANS,
-1.,Owner,has,unlimited,liability,for,business,debts.,
2.,Life,span,is,limited,to,owners,life,span.
3.,Amount,of,equity,that,can,be,raised,is,limited,to,the,proprietors,personal,wealth.
4.,Ownership,is,difficult,to,transfer.
What,are,four,advantages,to,the,sole,proprietorship,and,partnership,forms,of,business?,,,ANS,-
1.,Simplest,type,of,business,to,start.
2.,Least,regulated.
3.,Owner,keeps,all,profits.
4.,No,double,taxation.
What,goal,should,always,motivate,the,actions,of,the,firms,financial,manager?,,,ANS,-
The,goal,of,financial,management,is,to,maximize,the,current,value,per,share,of,the,existing,stock.
Balance,Sheet,,,ANS,-Financial,statement,showing,a,firms,accounting,value,on,a,particular,date.
Assets,are,classified,as,either,,,ANS,-current,or,fixed.
A,current,asset,has,a,life,of,,,ANS,-less,than,one,year.
Liabilities,are,classified,as,either,,,ANS,-current,or,long,term.
Net,working,capital,,,ANS,-
Current,assets,less,current,liabilities.,It,is,the,difference,between,a,firms,current,assets,and,its,current,lia
bilities.
Liquidity,refers,to,,,ANS,-
the,speed,and,ease,with,which,an,asset,can,be,converted,to,cash.,Liquidity,has,two,dimensions:,ease,of,c
onversion,and,loss,of,value.
