FINC 3610 EXAM QUESTIONS WITH
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
Corporate Finance - ANS a branch of finance that deals with the capital structure and
financial decisions of corporations. encompasses the management of financial resources,
investment decisions, capital budgeting, aiming to maximize shareholder wealth while
managing risks effectively.
three functions of corporate finance - ANS capital budgeting, capital structure, financial
management and policies
Capital Budgeting - ANS the process of planning and managing a firm's long-term
investments. aims to allocate capital in a way that maximizes the value of the firm
Capital Structure - ANS the mix of equity and debt financing a firm uses to fund its operations
and investments. examines the optimal capital structure that balances risk and return to
maximize shareholder value.
financial management and policies - ANS inlcudes managing the company's financial
resources, liquidity management, dividend policies, and working capital management. ensures
efficent use of funds and support the overall financial health of the firm
goal of the firm - ANS maximize shareholder wealth
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Sole Proprietorship - ANS A business owned by one person. easy to start and manage.
unlimited personal liability.
General Partnership - ANS A partnership in which all owners share in operating the business
and in assuming liability for the business's debts.
limited partnership - ANS A partnership with one or more general partners (specialized
mngt) have unlimited liability and one or more limited partners.
Corporation - ANS A business owned by stockholders who share in its profits but are not
personally responsible for its debts
Agency Costs - ANS the costs of the conflict of interest between stockholders and
management
to mitigate agency costs, firms can implement: - ANS corporate goverance, incentivwe
alignment, monitoring and transparency
corporate goverance - ANS the system of governing a company so that the interests of
corporate owners and other stakeholders are protected. examples: independent board of
directors, audit committees
incentive alignment - ANS designing compensation packages that align managerial incentives
with shareholder wealth maximization
example: performance-based bonus
monitoring and transparency - ANS enhancing transparency in financial reporting and
operations, and ensuring regular monitoring of management actions by boards and
shareholders
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
Corporate Finance - ANS a branch of finance that deals with the capital structure and
financial decisions of corporations. encompasses the management of financial resources,
investment decisions, capital budgeting, aiming to maximize shareholder wealth while
managing risks effectively.
three functions of corporate finance - ANS capital budgeting, capital structure, financial
management and policies
Capital Budgeting - ANS the process of planning and managing a firm's long-term
investments. aims to allocate capital in a way that maximizes the value of the firm
Capital Structure - ANS the mix of equity and debt financing a firm uses to fund its operations
and investments. examines the optimal capital structure that balances risk and return to
maximize shareholder value.
financial management and policies - ANS inlcudes managing the company's financial
resources, liquidity management, dividend policies, and working capital management. ensures
efficent use of funds and support the overall financial health of the firm
goal of the firm - ANS maximize shareholder wealth
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Sole Proprietorship - ANS A business owned by one person. easy to start and manage.
unlimited personal liability.
General Partnership - ANS A partnership in which all owners share in operating the business
and in assuming liability for the business's debts.
limited partnership - ANS A partnership with one or more general partners (specialized
mngt) have unlimited liability and one or more limited partners.
Corporation - ANS A business owned by stockholders who share in its profits but are not
personally responsible for its debts
Agency Costs - ANS the costs of the conflict of interest between stockholders and
management
to mitigate agency costs, firms can implement: - ANS corporate goverance, incentivwe
alignment, monitoring and transparency
corporate goverance - ANS the system of governing a company so that the interests of
corporate owners and other stakeholders are protected. examples: independent board of
directors, audit committees
incentive alignment - ANS designing compensation packages that align managerial incentives
with shareholder wealth maximization
example: performance-based bonus
monitoring and transparency - ANS enhancing transparency in financial reporting and
operations, and ensuring regular monitoring of management actions by boards and
shareholders
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
