Fundamentals of Corporate Finance Overview Questions with Correct Answers| New Update
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Corporate Finance Division managing finance and investment decisions.
Finance Decisions Choices on raising funds for business.
Investment Decisions Choices on spending acquired funds.
Equity Finance Money invested by business owners via shares.
Debt Finance Money borrowed from banks and lenders.
Dividends Ongoing payments to shareholders from profits.
Statement of Financial Position Financial statement showing company's assets and liabilities.
Gearing Measure of a company's debt relative to equity.
Debt-to-Equity Ratio Percentage comparing debt finance to equity finance.
Financial Risk Risk associated with high levels of debt.
Interest Payments Costs reducing annual profits due to debt.
Bankruptcy Risk Increased risk of insolvency due to debt.
Future Investment Challenges High gearing complicates raising future finance.
,Share Capital Funds raised by selling ordinary shares.
Retained Profit Reinvested profits from shareholders' earnings.
Primary Market Initial sale of shares to raise business funds.
Secondary Market Trading of shares between investors post-IPO.
Market Value Share price based on supply and demand.
Internal Factors Company performance affecting share value.
External Factors Economic conditions impacting share price.
Efficient Market Hypothesis Theory stating prices reflect all available information.
Investor Ratios Metrics for shareholders to assess investment worth.
Weak form efficiency Prices reflect only past information and performance.
Semi-strong efficiency Prices reflect past and current public information.
Strong form efficiency Prices reflect all information, public and private.
Insider trading Buying/selling shares using confidential information illegally.
, Retained earnings Initial capital raised from reinvested profits.
Dividend policy Strategy determining how much profit is paid as dividends.
Low dividends Higher reinvestment leads to greater future growth potential.
High dividends Lower reinvestment results in slower growth potential.
Modigliani & Miller theory Dividends do not affect shareholder wealth.
Positive NPV Investment projects expected to generate more value than cost.
Bird in the hand theory Investors prefer certain dividends over uncertain future growth.
Signalling theory Dividend changes indicate company's financial health.
Clientele effect Dividend policy changes may deter existing investors.
Dividend growth trends Historical trends predict future dividend payments.
Dividend growth rate Formula to calculate average annual dividend growth.
Correlation coefficient Measures predictability of dividend trends, closer to 1 is better.
Rights issue Existing shareholders offered additional shares to maintain control.
with Guaranteed Success
Corporate Finance Division managing finance and investment decisions.
Finance Decisions Choices on raising funds for business.
Investment Decisions Choices on spending acquired funds.
Equity Finance Money invested by business owners via shares.
Debt Finance Money borrowed from banks and lenders.
Dividends Ongoing payments to shareholders from profits.
Statement of Financial Position Financial statement showing company's assets and liabilities.
Gearing Measure of a company's debt relative to equity.
Debt-to-Equity Ratio Percentage comparing debt finance to equity finance.
Financial Risk Risk associated with high levels of debt.
Interest Payments Costs reducing annual profits due to debt.
Bankruptcy Risk Increased risk of insolvency due to debt.
Future Investment Challenges High gearing complicates raising future finance.
,Share Capital Funds raised by selling ordinary shares.
Retained Profit Reinvested profits from shareholders' earnings.
Primary Market Initial sale of shares to raise business funds.
Secondary Market Trading of shares between investors post-IPO.
Market Value Share price based on supply and demand.
Internal Factors Company performance affecting share value.
External Factors Economic conditions impacting share price.
Efficient Market Hypothesis Theory stating prices reflect all available information.
Investor Ratios Metrics for shareholders to assess investment worth.
Weak form efficiency Prices reflect only past information and performance.
Semi-strong efficiency Prices reflect past and current public information.
Strong form efficiency Prices reflect all information, public and private.
Insider trading Buying/selling shares using confidential information illegally.
, Retained earnings Initial capital raised from reinvested profits.
Dividend policy Strategy determining how much profit is paid as dividends.
Low dividends Higher reinvestment leads to greater future growth potential.
High dividends Lower reinvestment results in slower growth potential.
Modigliani & Miller theory Dividends do not affect shareholder wealth.
Positive NPV Investment projects expected to generate more value than cost.
Bird in the hand theory Investors prefer certain dividends over uncertain future growth.
Signalling theory Dividend changes indicate company's financial health.
Clientele effect Dividend policy changes may deter existing investors.
Dividend growth trends Historical trends predict future dividend payments.
Dividend growth rate Formula to calculate average annual dividend growth.
Correlation coefficient Measures predictability of dividend trends, closer to 1 is better.
Rights issue Existing shareholders offered additional shares to maintain control.
