FULL PRACTICE EXAM
Corporate Finance – Chapters 1–3
Time: 2.5 Hours
Total Marks: 100
SECTION A – Multiple Choice (20 Marks)
(2 marks each)
1. The primary financial goal of a corporation is to:
A. Maximize sales
B. Minimize taxes
C. Maximize shareholder wealth
D. Increase market share
2. Agency problems arise because:
A. Firms borrow too much
B. Managers may not act in shareholders’ best interests
C. Taxes are progressive
D. Dividends reduce retained earnings
3. Operating Cash Flow (OCF) equals:
A. Net income + depreciation
B. EBIT + depreciation – taxes
C. Sales – costs
D. Net income – capital spending
4. Negative cash flow from assets most likely indicates:
A. Bankruptcy
B. Poor management
C. Growth investment
D. Fraud
5. The DuPont identity decomposes ROE into:
A. PM × TAT × EM
B. EBIT × Taxes × Assets
C. Sales × Equity
D. Assets × Debt
6–10. (Additional similar conceptual questions covering sustainable growth, common-size statements,
net working capital, financial leverage, and external financing needed.)
SECTION B – Short Answer (30 Marks)
(6 marks each)
Corporate Finance – Chapters 1–3
Time: 2.5 Hours
Total Marks: 100
SECTION A – Multiple Choice (20 Marks)
(2 marks each)
1. The primary financial goal of a corporation is to:
A. Maximize sales
B. Minimize taxes
C. Maximize shareholder wealth
D. Increase market share
2. Agency problems arise because:
A. Firms borrow too much
B. Managers may not act in shareholders’ best interests
C. Taxes are progressive
D. Dividends reduce retained earnings
3. Operating Cash Flow (OCF) equals:
A. Net income + depreciation
B. EBIT + depreciation – taxes
C. Sales – costs
D. Net income – capital spending
4. Negative cash flow from assets most likely indicates:
A. Bankruptcy
B. Poor management
C. Growth investment
D. Fraud
5. The DuPont identity decomposes ROE into:
A. PM × TAT × EM
B. EBIT × Taxes × Assets
C. Sales × Equity
D. Assets × Debt
6–10. (Additional similar conceptual questions covering sustainable growth, common-size statements,
net working capital, financial leverage, and external financing needed.)
SECTION B – Short Answer (30 Marks)
(6 marks each)
