Finance 3060 Exam 1 Clemson (CH 1-3)
The goal of financial management - Correct Answer-maximize the current value per
share of the existing stock
A More General Financial Management Goal - Correct Answer-maximize the market
value of the existing owners' equity
Sarbanes-Oxley Act of 2002 - Correct Answer-Strengthen protection against corporate
accounting fraud and malpractice
Agency Relationship - Correct Answer-relationship between stockholders and
management
Agency problem - Correct Answer-The possibility of conflict of interest between the
owners and management of a firm
Management Goals - Correct Answer-To increase the organization's profits, may tend to
overemphasize organizational survival to protect job security
Managerial Compensation - Correct Answer--Tied to financial performance
-Better performers get promoted
Fintech - Correct Answer-financial technology - softwares, internet to provide financial
services
Capital Budgeting - Correct Answer-The process of planning and managing a firm's
long-term investments
Capital Structure - Correct Answer-The mixture of debt and equity maintained by a firm
Working Capital - Correct Answer-A firm's short-term assets and liabilities
Sole Proprietorship - Correct Answer-A business owned by a single individual
-Simplest and least regulated form
-Unlimited liability
Partnership - Correct Answer-A business formed by two or more individuals or entities
-Unlimited liability
limited partnership - Correct Answer-partnership in which only one partner is required to
be a general partner
, Disadvantages of Sole Proprietorships and Partnerships - Correct Answer-1. Unlimited
liability for business debts on partner owners
2. Limited life of business
3. Difficulty transferring ownership
Corporation - Correct Answer-A business created as a distinct legal entity owned by one
or more individuals or entities
-More complicated to start (articles of incorporation and bylaws)
-Stockholders and managers separate groups
-Limited liability
-Double taxation
The five basic areas of finance - Correct Answer-1. Corporate Finance
2. Investments
3. Financial Institutions
4. International Finance
5. Fintech
Corporate Finance - Correct Answer-The finance function within a business
Investments - Correct Answer-Financial assets - stocks and bonds
Financial Institutions - Correct Answer-Businesses that deal with financial matters
(banks, insurance companies)
International Finance - Correct Answer-Finance involving international aspects
LLC (Limited Liability Company) - Correct Answer-Limited liability, pass through income
taxation, flexibility
benefit corporation - Correct Answer-for-profit
-accountability
-transparency
-purpose
Profit Maximization - Correct Answer-Most commonly cited business goal
Control of the Firm - Correct Answer-Ultimately rests with stockholders
proxy fight - Correct Answer-the mechanism by which unhappy stockholders can act to
replace existing management
The goal of financial management - Correct Answer-maximize the current value per
share of the existing stock
A More General Financial Management Goal - Correct Answer-maximize the market
value of the existing owners' equity
Sarbanes-Oxley Act of 2002 - Correct Answer-Strengthen protection against corporate
accounting fraud and malpractice
Agency Relationship - Correct Answer-relationship between stockholders and
management
Agency problem - Correct Answer-The possibility of conflict of interest between the
owners and management of a firm
Management Goals - Correct Answer-To increase the organization's profits, may tend to
overemphasize organizational survival to protect job security
Managerial Compensation - Correct Answer--Tied to financial performance
-Better performers get promoted
Fintech - Correct Answer-financial technology - softwares, internet to provide financial
services
Capital Budgeting - Correct Answer-The process of planning and managing a firm's
long-term investments
Capital Structure - Correct Answer-The mixture of debt and equity maintained by a firm
Working Capital - Correct Answer-A firm's short-term assets and liabilities
Sole Proprietorship - Correct Answer-A business owned by a single individual
-Simplest and least regulated form
-Unlimited liability
Partnership - Correct Answer-A business formed by two or more individuals or entities
-Unlimited liability
limited partnership - Correct Answer-partnership in which only one partner is required to
be a general partner
, Disadvantages of Sole Proprietorships and Partnerships - Correct Answer-1. Unlimited
liability for business debts on partner owners
2. Limited life of business
3. Difficulty transferring ownership
Corporation - Correct Answer-A business created as a distinct legal entity owned by one
or more individuals or entities
-More complicated to start (articles of incorporation and bylaws)
-Stockholders and managers separate groups
-Limited liability
-Double taxation
The five basic areas of finance - Correct Answer-1. Corporate Finance
2. Investments
3. Financial Institutions
4. International Finance
5. Fintech
Corporate Finance - Correct Answer-The finance function within a business
Investments - Correct Answer-Financial assets - stocks and bonds
Financial Institutions - Correct Answer-Businesses that deal with financial matters
(banks, insurance companies)
International Finance - Correct Answer-Finance involving international aspects
LLC (Limited Liability Company) - Correct Answer-Limited liability, pass through income
taxation, flexibility
benefit corporation - Correct Answer-for-profit
-accountability
-transparency
-purpose
Profit Maximization - Correct Answer-Most commonly cited business goal
Control of the Firm - Correct Answer-Ultimately rests with stockholders
proxy fight - Correct Answer-the mechanism by which unhappy stockholders can act to
replace existing management
