CFA Level I Corporate Finance curriculum
TOP 100 QUESTIONS
1. What is the primary goal of financial management? Answer: Maximizing
shareholder wealth.
2. What are the three main functions of a financial manager? Answer: Capital
budgeting, capital structure, and working capital management.
3. What is capital budgeting? Answer: The process of planning and managing a
firm's long-term investments.
4. What is capital structure? Answer: The mix of debt and equity financing a
firm uses to fund its operations.
5. What is working capital management? Answer: The management of a firm's
short-term assets and liabilities.
6. What is the time value of money (TVM)? Answer: The concept that money
available at the present time is worth more than the same amount in the future due
to its potential earning capacity.
7. What is future value (FV)? Answer: The value of an investment at a specified
date in the future based on its current value and the rate of return.
8. What is present value (PV)? Answer: The current value of a future sum of
money or stream of cash flows given a specified rate of return.
, 9. What is a discount rate? Answer: The rate used to calculate the present value
of future cash flows. It reflects the time value of money and the risk of the
investment.
10. What is an annuity? Answer: A series of equal cash flows occurring at regular
intervals over a specified period.
11. What is an ordinary annuity? Answer: An annuity where the cash flows
occur at the end of each period.
12. What is an annuity due? Answer: An annuity where the cash flows occur at
the beginning of each period.
13. What is a perpetuity? Answer: An annuity that continues forever.
14. How do you calculate the present value of a perpetuity? Answer: PV = Cash
Flow / Discount Rate.
15. What is the net present value (NPV)? Answer: The present value of all
expected future cash flows of a project minus the initial investment.
16. What decision rule is used for NPV? Answer: Accept projects with a positive
NPV and reject projects with a negative NPV.
17. What is the internal rate of return (IRR)? Answer: The discount rate that
makes the NPV of a project equal to zero.
18. What decision rule is typically used for IRR? Answer: Accept projects with
an IRR greater than the required rate of return (cost of capital).
TOP 100 QUESTIONS
1. What is the primary goal of financial management? Answer: Maximizing
shareholder wealth.
2. What are the three main functions of a financial manager? Answer: Capital
budgeting, capital structure, and working capital management.
3. What is capital budgeting? Answer: The process of planning and managing a
firm's long-term investments.
4. What is capital structure? Answer: The mix of debt and equity financing a
firm uses to fund its operations.
5. What is working capital management? Answer: The management of a firm's
short-term assets and liabilities.
6. What is the time value of money (TVM)? Answer: The concept that money
available at the present time is worth more than the same amount in the future due
to its potential earning capacity.
7. What is future value (FV)? Answer: The value of an investment at a specified
date in the future based on its current value and the rate of return.
8. What is present value (PV)? Answer: The current value of a future sum of
money or stream of cash flows given a specified rate of return.
, 9. What is a discount rate? Answer: The rate used to calculate the present value
of future cash flows. It reflects the time value of money and the risk of the
investment.
10. What is an annuity? Answer: A series of equal cash flows occurring at regular
intervals over a specified period.
11. What is an ordinary annuity? Answer: An annuity where the cash flows
occur at the end of each period.
12. What is an annuity due? Answer: An annuity where the cash flows occur at
the beginning of each period.
13. What is a perpetuity? Answer: An annuity that continues forever.
14. How do you calculate the present value of a perpetuity? Answer: PV = Cash
Flow / Discount Rate.
15. What is the net present value (NPV)? Answer: The present value of all
expected future cash flows of a project minus the initial investment.
16. What decision rule is used for NPV? Answer: Accept projects with a positive
NPV and reject projects with a negative NPV.
17. What is the internal rate of return (IRR)? Answer: The discount rate that
makes the NPV of a project equal to zero.
18. What decision rule is typically used for IRR? Answer: Accept projects with
an IRR greater than the required rate of return (cost of capital).
