Corp Finance Midterm Exam Questions And Answers
Corporation- Solution Separated legal entity, owners do not have any personal liability in
case of firms' debt.
Ability to raise large amount of equity capital
Ease of ownership transfer
Profits are taxed at corporate level
Treasurer- Solution In control of the cash management
Capital Budgeting- Solution Size, timing and risk of future cash flow evaluation.
Authorized to purchase fixed asset.
Working capital decision- Solution "How much cash should reserve?
Capital Structure Decision - Answer Has to do with DEBT & EQUITY
Limited Partnership - Answer Offers liability protection to some of its owners but not to
all of its owners.
Loss is limited to capital investment.
There must be AT LEAST ONE general partner
Sole Proprietorship - Answer Obtaining additional equity is dependent on the owner's
personal finances. Owner is liable for debts. Has profits taxed as personal income.
General Partnership - Answer Any one of the partners can be held solely liable for all of
the partnership's debt.
, Agency Conflict - Answer Separating management from ownership
TO AVOID: Compensating managers with shares of stock that must be held for three
years before the shares can be sold
Secondary Market - Answer All stock trades between existing shareholders.
NYSE: New York Stock Exchange
Security Dealer - Answer Dealers buy and sell from their own inventory.
Corporate Shareholders - Answer Can change the corporation's bylaws.
Sarbanes Oxley Act - Answer Increased protection against corporate fraud.
Made officers of publicly traded firms personally responsible for the firm's financial
statements.
Primary Market - Answer Company sells 1000 newly issued stocks to Mike
Goal of financial management - Answer Maximize current market value per share.
Capital Management - Answer Decide which customers to grant credit
Stakeholder - Answer Anyone who purchases from your firm
Income Statement - Answer The revenues, expenses and net income of a business over
some period of time
Balance Sheet -Answer A summary of a firms accounting value at a point in time
Corporation- Solution Separated legal entity, owners do not have any personal liability in
case of firms' debt.
Ability to raise large amount of equity capital
Ease of ownership transfer
Profits are taxed at corporate level
Treasurer- Solution In control of the cash management
Capital Budgeting- Solution Size, timing and risk of future cash flow evaluation.
Authorized to purchase fixed asset.
Working capital decision- Solution "How much cash should reserve?
Capital Structure Decision - Answer Has to do with DEBT & EQUITY
Limited Partnership - Answer Offers liability protection to some of its owners but not to
all of its owners.
Loss is limited to capital investment.
There must be AT LEAST ONE general partner
Sole Proprietorship - Answer Obtaining additional equity is dependent on the owner's
personal finances. Owner is liable for debts. Has profits taxed as personal income.
General Partnership - Answer Any one of the partners can be held solely liable for all of
the partnership's debt.
, Agency Conflict - Answer Separating management from ownership
TO AVOID: Compensating managers with shares of stock that must be held for three
years before the shares can be sold
Secondary Market - Answer All stock trades between existing shareholders.
NYSE: New York Stock Exchange
Security Dealer - Answer Dealers buy and sell from their own inventory.
Corporate Shareholders - Answer Can change the corporation's bylaws.
Sarbanes Oxley Act - Answer Increased protection against corporate fraud.
Made officers of publicly traded firms personally responsible for the firm's financial
statements.
Primary Market - Answer Company sells 1000 newly issued stocks to Mike
Goal of financial management - Answer Maximize current market value per share.
Capital Management - Answer Decide which customers to grant credit
Stakeholder - Answer Anyone who purchases from your firm
Income Statement - Answer The revenues, expenses and net income of a business over
some period of time
Balance Sheet -Answer A summary of a firms accounting value at a point in time
