FINA 3770 EXAM 1 2025/2026 QUESTIONS
AND ANSWERS 100% PASS
Incremental cash flow - ANS The Difference between the cashflows a company will produce
with and without the investment it is thinking about making
Opportunity cost - ANS Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another
Efficient market - ANS The theory that asset prices reflect all publicly available information
about the value of the asset
Agency problem - ANS Conflict of interest between principal and agent
Capital budgeting - ANS The process a firm uses to evaluate long-term investment proposals
Capital structure decision - ANS the decision-making process with funding choices and the
mix of long-term sources of funds
Working capital management - ANS Management of day to day operation and decisions
related to working capital and short term financing.
Financial market - ANS Financial institutions through which savers can directly provide funds
to borrowers
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Sole proprietorship - ANS A business owned by one person
Partnership - ANS A business in which two or more persons combine their assets and skills
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 -Must have one or more general partners and one or more limited
partner
Corporation - ANS A business owned by stockholders who share in its profits but are not
personally responsible for its debts
S corporation - ANS A unique government creation that looks like a corporation but is taxed
like sole proprietorships and partnerships
Limited liability company - ANS A business organization in which the business (not the
owner) is liable for the company's debts
Capital markets - ANS Markets that trade debt (bonds) and equity (stock) instruments with
maturities of more than one year
Angel investor - ANS individuals who invest in start-up companies with high growth potential
in exchange for a share of ownership
Venture capalist - ANS An investment firm that provides money for startup
Public offering - ANS A primary market issue in which new securities are offered to any
investors who are willing and able to purchase them
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
AND ANSWERS 100% PASS
Incremental cash flow - ANS The Difference between the cashflows a company will produce
with and without the investment it is thinking about making
Opportunity cost - ANS Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another
Efficient market - ANS The theory that asset prices reflect all publicly available information
about the value of the asset
Agency problem - ANS Conflict of interest between principal and agent
Capital budgeting - ANS The process a firm uses to evaluate long-term investment proposals
Capital structure decision - ANS the decision-making process with funding choices and the
mix of long-term sources of funds
Working capital management - ANS Management of day to day operation and decisions
related to working capital and short term financing.
Financial market - ANS Financial institutions through which savers can directly provide funds
to borrowers
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Sole proprietorship - ANS A business owned by one person
Partnership - ANS A business in which two or more persons combine their assets and skills
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 -Must have one or more general partners and one or more limited
partner
Corporation - ANS A business owned by stockholders who share in its profits but are not
personally responsible for its debts
S corporation - ANS A unique government creation that looks like a corporation but is taxed
like sole proprietorships and partnerships
Limited liability company - ANS A business organization in which the business (not the
owner) is liable for the company's debts
Capital markets - ANS Markets that trade debt (bonds) and equity (stock) instruments with
maturities of more than one year
Angel investor - ANS individuals who invest in start-up companies with high growth potential
in exchange for a share of ownership
Venture capalist - ANS An investment firm that provides money for startup
Public offering - ANS A primary market issue in which new securities are offered to any
investors who are willing and able to purchase them
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
