FINANCE 306 FINAL STUDY SHEET 2026
COMPLETE QUESTIONS AND ANSWERS.
◍ Cash. Ans: Think physical dollars *and* things that can be quickly
converted to cash (e.g., treasury bill, bank accounts). Cash ($ amt.) and
Cash flow are closely related
◍ Consumption. Ans: People spending cash (e.g., buying something for
immediate use)
◍ Investment. Ans: People saving cash (e.g., spending cash somewhere
else so it can appreciate)
◍ Investment ultimately flows into.... Ans: Real assets (something that
is productive)
◍ Firms. Ans: People give firms cash to invest in real assets (e.g.,
buying a stock in Apple (IPO only), which they can use to produce
iPhones
◍ A Financial Claim. Ans: A person's right to receive cash flows that
real assets generate
, ◍ A Fixed Claim. Ans: By contract, what fixed amount a person will
receive (e.g., bond coupon payment)
◍ A Residual Claim. Ans: Equity holders get whatever is left over after
a fixed claim
◍ Financial Managers. Ans: Make decisions on behalf of the people
who firms give cash to invest. Managers work for SHAREHOLDERS
(e.g., CFO, COO, CEO)
◍ Price. Ans: A one-time cash equivalent value of a claim.
◍ Market Cap(italization). Ans: One-time cash equivalent of a firm's
equity. Stock price X shares outstanding
◍ Agency Problem. Ans: (1) Shareholders (principals) = owners (they
stand to lose)
(2) Managers (Agents) = those making the decisions (working for the
principals)
◍ Corporate Governance. Ans: How the agency problem gets answered
◍ Decisions. Ans: —Inside the firm (corporate finance):
Investing
COMPLETE QUESTIONS AND ANSWERS.
◍ Cash. Ans: Think physical dollars *and* things that can be quickly
converted to cash (e.g., treasury bill, bank accounts). Cash ($ amt.) and
Cash flow are closely related
◍ Consumption. Ans: People spending cash (e.g., buying something for
immediate use)
◍ Investment. Ans: People saving cash (e.g., spending cash somewhere
else so it can appreciate)
◍ Investment ultimately flows into.... Ans: Real assets (something that
is productive)
◍ Firms. Ans: People give firms cash to invest in real assets (e.g.,
buying a stock in Apple (IPO only), which they can use to produce
iPhones
◍ A Financial Claim. Ans: A person's right to receive cash flows that
real assets generate
, ◍ A Fixed Claim. Ans: By contract, what fixed amount a person will
receive (e.g., bond coupon payment)
◍ A Residual Claim. Ans: Equity holders get whatever is left over after
a fixed claim
◍ Financial Managers. Ans: Make decisions on behalf of the people
who firms give cash to invest. Managers work for SHAREHOLDERS
(e.g., CFO, COO, CEO)
◍ Price. Ans: A one-time cash equivalent value of a claim.
◍ Market Cap(italization). Ans: One-time cash equivalent of a firm's
equity. Stock price X shares outstanding
◍ Agency Problem. Ans: (1) Shareholders (principals) = owners (they
stand to lose)
(2) Managers (Agents) = those making the decisions (working for the
principals)
◍ Corporate Governance. Ans: How the agency problem gets answered
◍ Decisions. Ans: —Inside the firm (corporate finance):
Investing
