FIN 341 QUESTIONS AND ANSWERS
1. The goal of a firm is to - Answers -maximize shareholder wealth.
2. If your business earns more than its cost of capital then it_______value, but if it earns
less than its cost of capital it ______value. - Answers -adds, destroys
3. ______ and not ______ drives value. - Answers -cash flow, not profit
4. The ______ statement, which is published every ______ by public companies in the
U.S. as per the______, is the ______ important of the three financial statements
(including the balance sheet and the income statement). - Answers -cash flow, quarter,
Securities and Exchange Commission (SEC), most
5. ___1___ is key. Further, ______, which is ___1____ less ______, may be the Holy
Grail for business valuation. - Answers -Operating cash flow, free cash flow, operating
cash flow less capital expenditures
6. What is the time value of money principle? - Answers -a dollar received today is
worth more than one received in the future
7. The opportunity cost is - Answers -of an investment alternative foregone. Could I
have earned more if I invested in that?
8. Risk and return rise and fall in ______. - Answers -tandem
9. In a strongly efficient market all information public and private is embedded in the
stock's price. T/F? - Answers -BULLSHIT
10. The agency problem is due to the separation of _____ and _____. I look to buy the
shares of companies in which - Answers -managers and their owners / shareholders,
managers are heavily invested in their businesses (i.e., they're stockholders too).
*11. Finance's three basic issues / decisions - Answers -1) capital budgeting (i.e., long-
term); 2) how to raise money (i.e., capital structure); 3) managing daily cash flows
(working capital)
ALL have "capital", BSW
12. The Chief Executive (CEO) reports to the _____, just like Western's President
Randhawa answers to the - Answers -company's Board of Directors,
University's Board of Trustees.
13. The vice president of finance or ______ runs the group that answers - Answers -
chief financial officer (CFO),
finance's three basic issues/decisions (#11)
, 14. In a sole proprietorship the business is ______ with its ______. For example, the
individual owner has - Answers -intertwined, owner, unlimited liability
15. A corporation legally separates - Answers -the business and its owners
16. In a general partnership all partners are ______ - Answers -liable
17. In a limited partnership partners are only _______ for the - Answers -liable, amount
they invested in the partnership
18. One corporate drawback is _______. First, the company must ______. Then taxes
are paid by - Answers -double taxation, pay taxes, shareholders who receive after-tax
dividends from the firm.... company and s.h.'s*
19. An LLC is a limited liability company. It may be a nice compromise because -
Answers -it offers limited liability, but it's taxed like a partnership
1. Go ______! The U.S. only accounts for about ______% of ______ and its proportion
is ______. Learn to speak Mandarin because ______ will be the world's top economy
before ______ (according to PriceWaterhouse Coopers). - Answers -global, 25%, world
economic output (GDP, or gross domestic product), shrinking, China, 2030
21. How do businesses raise capital? 3 w/ examples - Answers -1. DIRECTLY to
savers / investors, 2. INDIRECTLY through investment bankers (e.g., an IPO, or initial
public offering), or 3. through FINANCIAL INTERMEDIARIES (e.g., a mutual fund in
which you may invest).
22. Venture capitalists, or ______, buy stakes in ______ or in ______ . A successful VC
finds a winner only ______% of the time. - Answers -VCs, emerging companies,
turnaround situations, 25%
*23. Know the basics of how a company executes an IPO through an ______...
LOOK TO WORD DOC AND RESEARCH - Answers -investment bank
24. The primary market / issue is for ______. The secondary market is for ______ of
companies that have been ______. - Answers -initial public investment, "follow on"
securities offerings, public
25. A ______ matures in no more than a ______. The ______ are for longer-term
investments. - Answers -money market instrument, year, capital markets
26. The New York Stock Exchange (NYSE) is an ______, which was founded on
______ in _____. The NASDAQ is an ____, or _____, exchange. - Answers -organized
exchange,
Wall Street in 1817, OTC, or over-the-counter
1. The goal of a firm is to - Answers -maximize shareholder wealth.
2. If your business earns more than its cost of capital then it_______value, but if it earns
less than its cost of capital it ______value. - Answers -adds, destroys
3. ______ and not ______ drives value. - Answers -cash flow, not profit
4. The ______ statement, which is published every ______ by public companies in the
U.S. as per the______, is the ______ important of the three financial statements
(including the balance sheet and the income statement). - Answers -cash flow, quarter,
Securities and Exchange Commission (SEC), most
5. ___1___ is key. Further, ______, which is ___1____ less ______, may be the Holy
Grail for business valuation. - Answers -Operating cash flow, free cash flow, operating
cash flow less capital expenditures
6. What is the time value of money principle? - Answers -a dollar received today is
worth more than one received in the future
7. The opportunity cost is - Answers -of an investment alternative foregone. Could I
have earned more if I invested in that?
8. Risk and return rise and fall in ______. - Answers -tandem
9. In a strongly efficient market all information public and private is embedded in the
stock's price. T/F? - Answers -BULLSHIT
10. The agency problem is due to the separation of _____ and _____. I look to buy the
shares of companies in which - Answers -managers and their owners / shareholders,
managers are heavily invested in their businesses (i.e., they're stockholders too).
*11. Finance's three basic issues / decisions - Answers -1) capital budgeting (i.e., long-
term); 2) how to raise money (i.e., capital structure); 3) managing daily cash flows
(working capital)
ALL have "capital", BSW
12. The Chief Executive (CEO) reports to the _____, just like Western's President
Randhawa answers to the - Answers -company's Board of Directors,
University's Board of Trustees.
13. The vice president of finance or ______ runs the group that answers - Answers -
chief financial officer (CFO),
finance's three basic issues/decisions (#11)
, 14. In a sole proprietorship the business is ______ with its ______. For example, the
individual owner has - Answers -intertwined, owner, unlimited liability
15. A corporation legally separates - Answers -the business and its owners
16. In a general partnership all partners are ______ - Answers -liable
17. In a limited partnership partners are only _______ for the - Answers -liable, amount
they invested in the partnership
18. One corporate drawback is _______. First, the company must ______. Then taxes
are paid by - Answers -double taxation, pay taxes, shareholders who receive after-tax
dividends from the firm.... company and s.h.'s*
19. An LLC is a limited liability company. It may be a nice compromise because -
Answers -it offers limited liability, but it's taxed like a partnership
1. Go ______! The U.S. only accounts for about ______% of ______ and its proportion
is ______. Learn to speak Mandarin because ______ will be the world's top economy
before ______ (according to PriceWaterhouse Coopers). - Answers -global, 25%, world
economic output (GDP, or gross domestic product), shrinking, China, 2030
21. How do businesses raise capital? 3 w/ examples - Answers -1. DIRECTLY to
savers / investors, 2. INDIRECTLY through investment bankers (e.g., an IPO, or initial
public offering), or 3. through FINANCIAL INTERMEDIARIES (e.g., a mutual fund in
which you may invest).
22. Venture capitalists, or ______, buy stakes in ______ or in ______ . A successful VC
finds a winner only ______% of the time. - Answers -VCs, emerging companies,
turnaround situations, 25%
*23. Know the basics of how a company executes an IPO through an ______...
LOOK TO WORD DOC AND RESEARCH - Answers -investment bank
24. The primary market / issue is for ______. The secondary market is for ______ of
companies that have been ______. - Answers -initial public investment, "follow on"
securities offerings, public
25. A ______ matures in no more than a ______. The ______ are for longer-term
investments. - Answers -money market instrument, year, capital markets
26. The New York Stock Exchange (NYSE) is an ______, which was founded on
______ in _____. The NASDAQ is an ____, or _____, exchange. - Answers -organized
exchange,
Wall Street in 1817, OTC, or over-the-counter
