CFIN Chapter 1 & 2 New Exam With 100% Correct Answers
(A+) Latest Update
Three basic forms of business: - ANSWER propreitorship, partnership, and corporation
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 1st:
- ANSWER 1. they are easy to form
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 2nd
- ANSWER 2. they are subject to few government regulations
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 3rd -
ANSWER 3. they are taxed like individuals
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
1st - ANSWER 1. owners have unlimited personal liability for the firms debts
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
2nd - ANSWER 2. the business has limited life
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
3rd - ANSWER 3. transferring ownership is similar to selling a house
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
4th - ANSWER 4. raising large amounts of funds is difficult
Advantages to forming businesses as a corporation: (Total of 4) 1st - ANSWER owners
have limited liability for the firms debt
,Advantages to forming businesses as a corporation: (Total of 4) 2nd - ANSWER
ownership is easily transferred through stock transactions
Advantages to forming businesses as a corporation: (Total of 4) 3rd - ANSWER the
business has an unlimited life
Advantages to forming businesses as a corporation: (Total of 4) 4th - ANSWER rasiing
large amounts of funds is easier than for parternerships, because corporations can
issue stocks and bonds, whereas partnerships cannot.
Disadvantages to forming businesses as a corporation (Total of 2)
1st - ANSWER setting up a corporation is more complex than setting up other forms of
business
Disadvantages to forming businesses as a corporation (Total of 2)
2nd - ANSWER earnings paid to stockholders as dividend are taxed prices
What is finance? - ANSWER the study of money, both cash inflows and outflows
Finance decisions deal with how money is - ANSWER raised and used by businesses,
governments, and individuals.
To make sounds financial decisions you must understand 3 general concepts: 1st -
ANSWER more value is preferred to less
To make sounds financial decisions you must understand 3 general concepts: 2nd -
ANSWER the sooner cash is received, the more valuable it is
To make sounds financial decisions you must understand 3 general concepts: 3rd -
ANSWER less-risky assets are more valuable than risker assets
, 5 Ratios: - ANSWER 1. liquidity
2. asset management
3. debt management
4. profitability ratios
5. market value ratios
Liquidity ratios - ANSWER gives an indication as to how well the firm can meet its
current obligations
asset management ratios - ANSWER shows how efficiently the firm utilizes its assets
(investments) to generate revenue
debt management - ANSWER give an indication of how well the firm is servicing its
current debt and whether the firm can take on more debt
profitability ratios - ANSWER shows the combined effects of liquidity management,
asset management, and debt management on operating results
market value ratios - ANSWER give an indication of what stockholders think of the firms
future prospects based on its past performance
Two general types of analyses should be completed when examining ratios: - ANSWER
comparative and trend analysis
Comparative analysis - ANSWER a comparison of how the firms current financial
position compares to that of its peers
Trend Analysis- ANSWER an analysis of the firms financial position over the most recent
3 to 5 years to indicate whether its financial position is likely to improve or deteriorate in
the future
(A+) Latest Update
Three basic forms of business: - ANSWER propreitorship, partnership, and corporation
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 1st:
- ANSWER 1. they are easy to form
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 2nd
- ANSWER 2. they are subject to few government regulations
Advantages to forming businesses as propreitorships and partnerships: (Total of 3) 3rd -
ANSWER 3. they are taxed like individuals
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
1st - ANSWER 1. owners have unlimited personal liability for the firms debts
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
2nd - ANSWER 2. the business has limited life
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
3rd - ANSWER 3. transferring ownership is similar to selling a house
Disadvantages to forming businesses as propreitorships and partnerships: (Total of 4)
4th - ANSWER 4. raising large amounts of funds is difficult
Advantages to forming businesses as a corporation: (Total of 4) 1st - ANSWER owners
have limited liability for the firms debt
,Advantages to forming businesses as a corporation: (Total of 4) 2nd - ANSWER
ownership is easily transferred through stock transactions
Advantages to forming businesses as a corporation: (Total of 4) 3rd - ANSWER the
business has an unlimited life
Advantages to forming businesses as a corporation: (Total of 4) 4th - ANSWER rasiing
large amounts of funds is easier than for parternerships, because corporations can
issue stocks and bonds, whereas partnerships cannot.
Disadvantages to forming businesses as a corporation (Total of 2)
1st - ANSWER setting up a corporation is more complex than setting up other forms of
business
Disadvantages to forming businesses as a corporation (Total of 2)
2nd - ANSWER earnings paid to stockholders as dividend are taxed prices
What is finance? - ANSWER the study of money, both cash inflows and outflows
Finance decisions deal with how money is - ANSWER raised and used by businesses,
governments, and individuals.
To make sounds financial decisions you must understand 3 general concepts: 1st -
ANSWER more value is preferred to less
To make sounds financial decisions you must understand 3 general concepts: 2nd -
ANSWER the sooner cash is received, the more valuable it is
To make sounds financial decisions you must understand 3 general concepts: 3rd -
ANSWER less-risky assets are more valuable than risker assets
, 5 Ratios: - ANSWER 1. liquidity
2. asset management
3. debt management
4. profitability ratios
5. market value ratios
Liquidity ratios - ANSWER gives an indication as to how well the firm can meet its
current obligations
asset management ratios - ANSWER shows how efficiently the firm utilizes its assets
(investments) to generate revenue
debt management - ANSWER give an indication of how well the firm is servicing its
current debt and whether the firm can take on more debt
profitability ratios - ANSWER shows the combined effects of liquidity management,
asset management, and debt management on operating results
market value ratios - ANSWER give an indication of what stockholders think of the firms
future prospects based on its past performance
Two general types of analyses should be completed when examining ratios: - ANSWER
comparative and trend analysis
Comparative analysis - ANSWER a comparison of how the firms current financial
position compares to that of its peers
Trend Analysis- ANSWER an analysis of the firms financial position over the most recent
3 to 5 years to indicate whether its financial position is likely to improve or deteriorate in
the future
