FINA 3313 EXAM 1 FLR QUIZ REVIEW QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
Finance is the art and science of managing money Ans✓✓✓True
Who is the financial manager? Ans✓✓✓Anyone whose decisions affect
the cash flows of the firm
What are the advantages of the corporate form of business organization?
Ans✓✓✓-Perpetual life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally
liable for all of its debts - owners can only lose the lessor of the value of
their investment or $100,000 Ans✓✓✓False
Shareholders get any assets or cash flows of the corporation that remain
after all other debts have been paid. Ans✓✓✓True
We can think of equity as a geree of ownership in any asset after
subtracting all debts associated with that asset. Shareholder equity is
calculated as Total __________ minus Total Liabilites Ans✓✓✓Assets
, By law, the board of directors make decisions as fiduciary on behalf of
company executives Ans✓✓✓False
The board makes decisions concerning the hiring and firing of
personnel, dividend policies and payouts, and executive compensation.
Ans✓✓✓True
The separation of ownership (shareholders) and control (managers) in
larger corporations with many shareholders can lead to conflicts of
interest between managers and owners. Ans✓✓✓True
Amazon and Walmart are examples of corporations because
Ans✓✓✓they are controlled by managers acting as agents for
shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several
equivalent ways (select all correct answers) Ans✓✓✓-Maximizing
shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price
because (check all correct) Ans✓✓✓-Timing is important - the receipt
of funds sooner rather than later is preferred. Time is money!
-Profit maximization fails to account for risk - extremely profitable
opportunities may be too risky
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
Finance is the art and science of managing money Ans✓✓✓True
Who is the financial manager? Ans✓✓✓Anyone whose decisions affect
the cash flows of the firm
What are the advantages of the corporate form of business organization?
Ans✓✓✓-Perpetual life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally
liable for all of its debts - owners can only lose the lessor of the value of
their investment or $100,000 Ans✓✓✓False
Shareholders get any assets or cash flows of the corporation that remain
after all other debts have been paid. Ans✓✓✓True
We can think of equity as a geree of ownership in any asset after
subtracting all debts associated with that asset. Shareholder equity is
calculated as Total __________ minus Total Liabilites Ans✓✓✓Assets
, By law, the board of directors make decisions as fiduciary on behalf of
company executives Ans✓✓✓False
The board makes decisions concerning the hiring and firing of
personnel, dividend policies and payouts, and executive compensation.
Ans✓✓✓True
The separation of ownership (shareholders) and control (managers) in
larger corporations with many shareholders can lead to conflicts of
interest between managers and owners. Ans✓✓✓True
Amazon and Walmart are examples of corporations because
Ans✓✓✓they are controlled by managers acting as agents for
shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several
equivalent ways (select all correct answers) Ans✓✓✓-Maximizing
shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price
because (check all correct) Ans✓✓✓-Timing is important - the receipt
of funds sooner rather than later is preferred. Time is money!
-Profit maximization fails to account for risk - extremely profitable
opportunities may be too risky
