FINC 3610 FINAL EXAM DISMUKES EXAM
QUESTIONS AND CORRECT ANSWERS!!
GUARANTEED SUCCESS, 2025 2026 EDITION
Three questions that corporate finance focused on? - ...answer1. capital budgeting
2. capital structure
3. working capital management
capital budgeting - ...answerwhat should we invest in long-term?
capital structure - ...answerhow do we finance those investments?
working capital structure - ...answerhow do we manage the day-to-day operation
of the firm?
Forms of business organization - ...answersole proprietorship, partnership, corporation
sole proprietorship - ...answerone single person--> high risk, high reward, unlimited liability,
easy to start-up, taxed as personal income, difficult to transfer ownership corpo
partnership - ...answer-general: run the business, making decisions, and accepting more risk,
easy to startup, taxed as personal income
-limited: there for money and investing, limited liability, life limited of that of owners, equity
limited to combined wealth, difficulty transferring ownership
corporation - ...answera business created as a distinct legal entity composed of one or more
individual entities
, -separation of ownership and control
-shareholders: anyone who owns stock in company
-directors: voted on by shareholders (proxy vote), ultimate oversight
-managers: run the company
What is the goal of financial management? - ...answer*maximize shareholder wealth*
Agency problem/conflict - ...answerThe possibility of conflict of interest between the
stockholders (the principal) and management (the agent) of a firm
Financial markets and the corporation - ...answerfirm: invest in assets, current and fixed
financial markets: short and long term debt, equity shares
-ultimately the firm must be a cash generating activity
-cash flows from the firm must exceed the cash flows from the financial markets
The balance sheet - ...answer-snapshot of the company at a point in time
-assets= liabilities + stockholders equity
The income statement - ...answer-performance of a company over a period of time
-revenues - expenses= income
-the bottom line: net income or EPS (earnings per share)
The statement of cash flows - ...answeroperating, investing, financing activities
operating activities - ...answerincludes cash receipts and cash payments for transactions relating
to revenue and expense activities
QUESTIONS AND CORRECT ANSWERS!!
GUARANTEED SUCCESS, 2025 2026 EDITION
Three questions that corporate finance focused on? - ...answer1. capital budgeting
2. capital structure
3. working capital management
capital budgeting - ...answerwhat should we invest in long-term?
capital structure - ...answerhow do we finance those investments?
working capital structure - ...answerhow do we manage the day-to-day operation
of the firm?
Forms of business organization - ...answersole proprietorship, partnership, corporation
sole proprietorship - ...answerone single person--> high risk, high reward, unlimited liability,
easy to start-up, taxed as personal income, difficult to transfer ownership corpo
partnership - ...answer-general: run the business, making decisions, and accepting more risk,
easy to startup, taxed as personal income
-limited: there for money and investing, limited liability, life limited of that of owners, equity
limited to combined wealth, difficulty transferring ownership
corporation - ...answera business created as a distinct legal entity composed of one or more
individual entities
, -separation of ownership and control
-shareholders: anyone who owns stock in company
-directors: voted on by shareholders (proxy vote), ultimate oversight
-managers: run the company
What is the goal of financial management? - ...answer*maximize shareholder wealth*
Agency problem/conflict - ...answerThe possibility of conflict of interest between the
stockholders (the principal) and management (the agent) of a firm
Financial markets and the corporation - ...answerfirm: invest in assets, current and fixed
financial markets: short and long term debt, equity shares
-ultimately the firm must be a cash generating activity
-cash flows from the firm must exceed the cash flows from the financial markets
The balance sheet - ...answer-snapshot of the company at a point in time
-assets= liabilities + stockholders equity
The income statement - ...answer-performance of a company over a period of time
-revenues - expenses= income
-the bottom line: net income or EPS (earnings per share)
The statement of cash flows - ...answeroperating, investing, financing activities
operating activities - ...answerincludes cash receipts and cash payments for transactions relating
to revenue and expense activities
