University:
Eastern Kentucky University
Course:
FIN 301 | Corporate Finance
Academic year:

2021
Views:

368

Pages:

3
Author:

Dania Lynch

Ch.1 Introduction to Corporate Finance Review Questions 1) An example of a capital budgeting decision is deciding: A) how many shares of stock to issue. B) whether or not to purchase a new machine for the production line. C) how to refinance a debt issue that is maturing. D) how much inventory to keep on hand. E) how much money should be kept in the checking account. 2) When evaluating the timing of a project's projected cash flows, a financial manager is analyzing: A) the amount of each expected cash flow. B) only the start-up costs that are expected to require cash resources. C) only the date of the final cash flow related to the project. D) the amount by which cash receipts are expected to exceed cash outflows. E) when each cash flow is expected to occur. 3) Which one of the following is a working capital management decision? A) What type(s) of equipment is (are) needed to complete a current project? B) Should the firm pay cash for a purchase or use the credit offered by the supplier? C) What amount of long-term debt is required to complete a project? D) How many shares of stock should the firm issue to fund an acquisition? E) Should a project should be accepted? 4) Which one of the following terms is defined as the management of a firm's long-term investments? A) Working capital management B) Financial allocation C) Agency cost analysis D) Capital budgeting E) Capital structure 5) Which one of the following is an agency cost? A) Accepting an investment opportunity that will add value to the firm B) Increasing the quarterly dividend C) Investing in a new project that creates firm value D) Hiring outside accountants to audit the company's financial statements E) Closing a division of the firm that is operating at a loss 6) Which one of the following parties has ultimate control of a corporation? A) Chairman of the board B) Board of directors C) Chief executive officer D) Chief operating officer E) Shareholders 7) Which one of the following actions by a financial manager is most apt to create an agency problem? A) Refusing to borrow money when doing so will create losses for the firm B) Refusing to lower selling prices if doing so will reduce the net profits C) Refusing to expand the company if doing so will lower the value of the equity D) Agreeing to pay bonuses based on the market value of the company's stock rather than on its level of sales E) Increasing current profits when doing so lowers the value of the company's equity 1.Answer: 2.Answer: 3.Answer: 4.Answer: 5.Answer: 6.Answer: 7.Answer: B E B D D E E

Introduction to Corporate Finance Review Questions

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