FINA 3313 EXAM 1 QUESTIONS AND
ANSWERS 100% PASS 2026/2027
S Corporation - ANS tax-reporting entity that allows certain corporations with 100 or fewer
stockholders to choose to be taxed as partnerships
Limited Liability Company (LLC) - ANS gives its owners limited liability and taxation as a
partnership. Unlike S corp, it can own more than 80% of another corporation
Limited Liability Partnership (LLP) - ANS partners are liable for their own acts of malpractice,
but not for those of other partners
Goal of the Firm - ANS maximize shareholder wealth/value
Three Reasons Why Profit Maximization Doesn't Lead to Highest Share Price - ANS timing;
profits and cash flows are NOT identical; risk matters A LOT
Investing in Cash Surpluses - ANS put funds in savings account or invest in marketable
securities; repay lenders and owners; replace aging assets; and invest in the company
Funding Cash Deficits - ANS take cash from savings; get unsecured/secured loans; get cash
from other sources such as commercial paper
@2026 ALLRIGHTS RESERVED 1
, Earning per Share (EPS) - ANS how corporations measure profits; represents the amount
earned during the period on behalf of each outstanding share of CS;
Key Determinants of Share Price - ANS risk and return
Risk Averse - ANS stockholders will only bear risk if they expect compensation for doing so
Stakeholders - ANS employees, customers, suppliers, creditors, owners, and others who have
economic link to the firm
Marginal Cost-Benefit Analysis - ANS the principle that financial decisions should be made
and actions taken only when the added benefits exceed added costs
Primary Activities of the Financial Manager - ANS investment decisions and financing
decisions (investment decisions are related to items on left side of balance sheet and financing
decisions relate to items on the right)
Individual Investors - ANS own few shares and don't have means to influence firm's corporate
governance
Institutional Investors - ANS investment professionals that are paid to manage and hold large
qty. of securities on behalf of individuals, businesses, and gov'ts (banks, MFs, insurance
companies, pension funds)
SOX (Sarbanes-Oxley) - ANS established oversight board to monitor accounting industry,
tightened audit regulation and controls, toughened penalties for executives, strengthened
accounting disclosure requirements and ethical guidelines for corporate officers
@2026 ALLRIGHTS RESERVED 2
ANSWERS 100% PASS 2026/2027
S Corporation - ANS tax-reporting entity that allows certain corporations with 100 or fewer
stockholders to choose to be taxed as partnerships
Limited Liability Company (LLC) - ANS gives its owners limited liability and taxation as a
partnership. Unlike S corp, it can own more than 80% of another corporation
Limited Liability Partnership (LLP) - ANS partners are liable for their own acts of malpractice,
but not for those of other partners
Goal of the Firm - ANS maximize shareholder wealth/value
Three Reasons Why Profit Maximization Doesn't Lead to Highest Share Price - ANS timing;
profits and cash flows are NOT identical; risk matters A LOT
Investing in Cash Surpluses - ANS put funds in savings account or invest in marketable
securities; repay lenders and owners; replace aging assets; and invest in the company
Funding Cash Deficits - ANS take cash from savings; get unsecured/secured loans; get cash
from other sources such as commercial paper
@2026 ALLRIGHTS RESERVED 1
, Earning per Share (EPS) - ANS how corporations measure profits; represents the amount
earned during the period on behalf of each outstanding share of CS;
Key Determinants of Share Price - ANS risk and return
Risk Averse - ANS stockholders will only bear risk if they expect compensation for doing so
Stakeholders - ANS employees, customers, suppliers, creditors, owners, and others who have
economic link to the firm
Marginal Cost-Benefit Analysis - ANS the principle that financial decisions should be made
and actions taken only when the added benefits exceed added costs
Primary Activities of the Financial Manager - ANS investment decisions and financing
decisions (investment decisions are related to items on left side of balance sheet and financing
decisions relate to items on the right)
Individual Investors - ANS own few shares and don't have means to influence firm's corporate
governance
Institutional Investors - ANS investment professionals that are paid to manage and hold large
qty. of securities on behalf of individuals, businesses, and gov'ts (banks, MFs, insurance
companies, pension funds)
SOX (Sarbanes-Oxley) - ANS established oversight board to monitor accounting industry,
tightened audit regulation and controls, toughened penalties for executives, strengthened
accounting disclosure requirements and ethical guidelines for corporate officers
@2026 ALLRIGHTS RESERVED 2
