Corporate Finance - Exam 1 Correctly
Answered
What is corporate finance? - Correct Answer What assets a company should buy
What projects to invest in
How to raise cash to finance these investments
in order to MAINTAIN AND MAXIMIZE ECONOMIC VALUE
Ultimately, the firm must be a __ - Correct Answer cash generating activity
The cash flows from the firm must __ the cash flows from the financial markets - Correct Answer exceed
2 main questions - Correct Answer 1. Capital budgeting
2. Capital structure
Capital budgeting decision - Correct Answer What long-term investments should the firm choose?
Fixed Assets
Capital structure decision - Correct Answer How should the firm raise funds for the selected investments
Liabilities and SH Equity
Ultimate goal of financial managers - Correct Answer Shareholder wealth maximization
= maximizing firm value
= maximizing stock price
SH wealth - Correct Answer stock price (fluctuates, want to maximize) * shares outstanding (relatively
stable)
Financial analyst reports are ___ looking - Correct Answer forward
, Annual and quarterly reports are __ looking - Correct Answer backward
Media is ___ information - Correct Answer current
Financial analyst reports, annual and quarterly reports, and media are all ___ information - Correct
Answer public
Insider trading - Correct Answer any time a person trades while aware of material nonpublic information
Illegal
Mr. Rajaratnam sentenced to 11 years - tips from company executives and technology consultants
Tips from Goldman Sachs director, classmate - got advanced warning of Warren Buffet investment
types of financial statements - Correct Answer balance sheet
income statement
accounting cash flow statement
finance cash flow statement
other
balance sheet - Correct Answer firm's accounting value at a specific point in time
assets go from most liquid to least liquid
liabilities go from debt (current to long-term) to SHE
liquidity - Correct Answer the ease and quickness with which assets can be converted to cash without a
significant loss in value
NWC - Correct Answer measure of short-term liquidity
Answered
What is corporate finance? - Correct Answer What assets a company should buy
What projects to invest in
How to raise cash to finance these investments
in order to MAINTAIN AND MAXIMIZE ECONOMIC VALUE
Ultimately, the firm must be a __ - Correct Answer cash generating activity
The cash flows from the firm must __ the cash flows from the financial markets - Correct Answer exceed
2 main questions - Correct Answer 1. Capital budgeting
2. Capital structure
Capital budgeting decision - Correct Answer What long-term investments should the firm choose?
Fixed Assets
Capital structure decision - Correct Answer How should the firm raise funds for the selected investments
Liabilities and SH Equity
Ultimate goal of financial managers - Correct Answer Shareholder wealth maximization
= maximizing firm value
= maximizing stock price
SH wealth - Correct Answer stock price (fluctuates, want to maximize) * shares outstanding (relatively
stable)
Financial analyst reports are ___ looking - Correct Answer forward
, Annual and quarterly reports are __ looking - Correct Answer backward
Media is ___ information - Correct Answer current
Financial analyst reports, annual and quarterly reports, and media are all ___ information - Correct
Answer public
Insider trading - Correct Answer any time a person trades while aware of material nonpublic information
Illegal
Mr. Rajaratnam sentenced to 11 years - tips from company executives and technology consultants
Tips from Goldman Sachs director, classmate - got advanced warning of Warren Buffet investment
types of financial statements - Correct Answer balance sheet
income statement
accounting cash flow statement
finance cash flow statement
other
balance sheet - Correct Answer firm's accounting value at a specific point in time
assets go from most liquid to least liquid
liabilities go from debt (current to long-term) to SHE
liquidity - Correct Answer the ease and quickness with which assets can be converted to cash without a
significant loss in value
NWC - Correct Answer measure of short-term liquidity
