ASU FIN 300 Exam 1 (Ch 1-
/ / / / / /
4) Questions With Correct Answers
/ / / /
Three /areas /of /finance: /- /correct /answer(s) /✔✔ /1. /*Financial /Management* /
-buying/selling /of /assets
-financing /choices
-control /costs /
2. /*Investments* /
-purchasing /and /holding /assets /& /securities /
-stocks /and /bonds /
3. /*Financial /Markets*
-capital /markets /
-money /markets /
-financial /intermediaries /(banks /or /credit /unions)
Productive /assets /- /correct /answer(s) /✔✔ /the /long-
term /tangible /and /intangible /*assets* /a /firm /uses /*to /generate /cash /flows*
Tangible /= /equipment /etc. /
intangible /= /patents, /trademarks, /technical /experience /
when /purchase /productive /assets /= /*capital /budgeting*
Financial
/Managers
,/should
/make /decisions /that /maximize /- /correct /answer(s) /✔✔ /the /*value /of /the /owner's /stock* /
which
/helps
/maximize /the /*owner's /wealth* /(the /economic /value /of /the /assets /the /owners /possesses)
Stakeholder /-
/correct
/answer(s)
/✔✔
/anyone
/other
/than
/the
/owner
/(stockholder)
/with /
a
/claim
/on /the /cash /flows /of /a /firm /(employees, /customers, /creditors, /suppliers, /the /government)
3
/fundamental
/decisions
/in
/financial
/management /- /correct /answer(s) /✔✔ /a. /*Capital /budgeting*- /which /productive /assets /to /buy
b.
/*Financing /decisions*- /raising /money /to /buy /more /p /assets, /mainly /through /selling /long /term
/*debt /and /equity*
c.
/*Working /capital* /decisions- /involve /how /firms /*manage /their /current /assets /and /liabilities*.
/Enough /money /to /*pay /the /bills* /and /any /money /left /over /is /invested /to /earn /a /return
,Capital
/Budgeting /-
/correct /answer(s) /✔✔ /*which /productive /assets* /the /firm /*should /purchase* /and /how /much
/money /the /firm /can /afford /to /spend /
*long
/term /assets* /on /balance /sheets/investments/ /productive /assets /both /tangible /and /intangible
Financing /decisions /- /correct /answer(s) /✔✔ /how /firms /raise /cash /to /pay /for /their /iterm-
55nvestments /
ex: /productive /assets /financed /by /long /term /borrowing /or /equity /investment /
debt /financing /- /advantage=tax /deductable /
but /increase /firms /risk /because /contractual /obligation /to /make /interest /payments /
equity- /has /no /maturity/guarantee /of /payments. /
*long /term /liability /(debt) /and /equity*
Working
/capital
/management
/decisions /-
/correct /answer(s) /✔✔ /how /to /manage /the /firm's /*current /assets /and /current /liabilities* /
*day /to /day* /management /of /short /term /asserts /and /liabilities /
, -mismanagement /cause /firm /to /go /into /debt/*bankruptcy* /
-*profitability /affected*
Capital /structure /- /correct /answer(s) /✔✔ /the /mix /of /debt /and /equity /that /is /used /to /finance /a
/firm
Net
/working
/capital /-
/correct
/answer(s) /✔✔ /the /dollar /difference /between /total /current /assets /and /total /current /liabilities
Capital
/Markets /-
/correct
/answer(s)
/✔✔
/financial
/markets
/where /equity /and /debt /instruments /with /maturities /greater /than /one /year /are /traded
Residual
/Cash
/Flow /-
/correct
/answer(s)
/✔✔ /cash /remaining /after /a /firm /has /paid /operating /expenses /and /what /it /owes /creditors /and
/taxes, /can /be /distributed /to /owners /as /cash /dividend /or /by /repurchasing /shares /or /reinvested
/into /business
Cash
/flows
/between
/ / / / / /
4) Questions With Correct Answers
/ / / /
Three /areas /of /finance: /- /correct /answer(s) /✔✔ /1. /*Financial /Management* /
-buying/selling /of /assets
-financing /choices
-control /costs /
2. /*Investments* /
-purchasing /and /holding /assets /& /securities /
-stocks /and /bonds /
3. /*Financial /Markets*
-capital /markets /
-money /markets /
-financial /intermediaries /(banks /or /credit /unions)
Productive /assets /- /correct /answer(s) /✔✔ /the /long-
term /tangible /and /intangible /*assets* /a /firm /uses /*to /generate /cash /flows*
Tangible /= /equipment /etc. /
intangible /= /patents, /trademarks, /technical /experience /
when /purchase /productive /assets /= /*capital /budgeting*
Financial
/Managers
,/should
/make /decisions /that /maximize /- /correct /answer(s) /✔✔ /the /*value /of /the /owner's /stock* /
which
/helps
/maximize /the /*owner's /wealth* /(the /economic /value /of /the /assets /the /owners /possesses)
Stakeholder /-
/correct
/answer(s)
/✔✔
/anyone
/other
/than
/the
/owner
/(stockholder)
/with /
a
/claim
/on /the /cash /flows /of /a /firm /(employees, /customers, /creditors, /suppliers, /the /government)
3
/fundamental
/decisions
/in
/financial
/management /- /correct /answer(s) /✔✔ /a. /*Capital /budgeting*- /which /productive /assets /to /buy
b.
/*Financing /decisions*- /raising /money /to /buy /more /p /assets, /mainly /through /selling /long /term
/*debt /and /equity*
c.
/*Working /capital* /decisions- /involve /how /firms /*manage /their /current /assets /and /liabilities*.
/Enough /money /to /*pay /the /bills* /and /any /money /left /over /is /invested /to /earn /a /return
,Capital
/Budgeting /-
/correct /answer(s) /✔✔ /*which /productive /assets* /the /firm /*should /purchase* /and /how /much
/money /the /firm /can /afford /to /spend /
*long
/term /assets* /on /balance /sheets/investments/ /productive /assets /both /tangible /and /intangible
Financing /decisions /- /correct /answer(s) /✔✔ /how /firms /raise /cash /to /pay /for /their /iterm-
55nvestments /
ex: /productive /assets /financed /by /long /term /borrowing /or /equity /investment /
debt /financing /- /advantage=tax /deductable /
but /increase /firms /risk /because /contractual /obligation /to /make /interest /payments /
equity- /has /no /maturity/guarantee /of /payments. /
*long /term /liability /(debt) /and /equity*
Working
/capital
/management
/decisions /-
/correct /answer(s) /✔✔ /how /to /manage /the /firm's /*current /assets /and /current /liabilities* /
*day /to /day* /management /of /short /term /asserts /and /liabilities /
, -mismanagement /cause /firm /to /go /into /debt/*bankruptcy* /
-*profitability /affected*
Capital /structure /- /correct /answer(s) /✔✔ /the /mix /of /debt /and /equity /that /is /used /to /finance /a
/firm
Net
/working
/capital /-
/correct
/answer(s) /✔✔ /the /dollar /difference /between /total /current /assets /and /total /current /liabilities
Capital
/Markets /-
/correct
/answer(s)
/✔✔
/financial
/markets
/where /equity /and /debt /instruments /with /maturities /greater /than /one /year /are /traded
Residual
/Cash
/Flow /-
/correct
/answer(s)
/✔✔ /cash /remaining /after /a /firm /has /paid /operating /expenses /and /what /it /owes /creditors /and
/taxes, /can /be /distributed /to /owners /as /cash /dividend /or /by /repurchasing /shares /or /reinvested
/into /business
Cash
/flows
/between
