FINA 3313 EXAM 1 FLR QUESTIONS AND
ANSWERS 100% PASS 2026/2027
Finance is the art and science of managing money - ANS True
Who is the financial manager? - ANS Anyone whose decisions affect the cash flows of the
firm
What are the advantages of the corporate form of business organization? - ANS -Perpetual
life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally liable for all of its debts -
owners can only lose the lessor of the value of their investment or $100,000 - ANS False
Shareholders get any assets or cash flows of the corporation that remain after all other debts
have been paid. - ANS True
@2026 ALLRIGHTS RESERVED 1
, We can think of equity as a geree of ownership in any asset after subtracting all debts
associated with that asset. Shareholder equity is calculated as Total __________ minus Total
Liabilites - ANS Assets
By law, the board of directors make decisions as fiduciary on behalf of company executives -
ANS False
The board makes decisions concerning the hiring and firing of personnel, dividend policies and
payouts, and executive compensation. - ANS True
The separation of ownership (shareholders) and control (managers) in larger corporations with
many shareholders can lead to conflicts of interest between managers and owners. -
ANS True
Amazon and Walmart are examples of corporations because - ANS they are controlled by
managers acting as agents for shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several equivalent ways (select
all correct answers) - ANS -Maximizing shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price because (check all correct)
- ANS -Timing is important - the receipt of funds sooner rather than later is preferred. Time is
money!
-Profit maximization fails to account for risk - extremely profitable opportunities may be too
risky
-Profits do not necessarily result in cash flows available to stockholders. There is a difference in
accounting values and cash flows.
@2026 ALLRIGHTS RESERVED 2
ANSWERS 100% PASS 2026/2027
Finance is the art and science of managing money - ANS True
Who is the financial manager? - ANS Anyone whose decisions affect the cash flows of the
firm
What are the advantages of the corporate form of business organization? - ANS -Perpetual
life
-Limited liability
-Easy transfer of ownership
-Ease of raising additional funds
Limited liability means that owners of a business are not personally liable for all of its debts -
owners can only lose the lessor of the value of their investment or $100,000 - ANS False
Shareholders get any assets or cash flows of the corporation that remain after all other debts
have been paid. - ANS True
@2026 ALLRIGHTS RESERVED 1
, We can think of equity as a geree of ownership in any asset after subtracting all debts
associated with that asset. Shareholder equity is calculated as Total __________ minus Total
Liabilites - ANS Assets
By law, the board of directors make decisions as fiduciary on behalf of company executives -
ANS False
The board makes decisions concerning the hiring and firing of personnel, dividend policies and
payouts, and executive compensation. - ANS True
The separation of ownership (shareholders) and control (managers) in larger corporations with
many shareholders can lead to conflicts of interest between managers and owners. -
ANS True
Amazon and Walmart are examples of corporations because - ANS they are controlled by
managers acting as agents for shareholders who have limited liability
The goal of maximizing shareholder wealth can be expressed in several equivalent ways (select
all correct answers) - ANS -Maximizing shareholder returns
-Maximizing the long-term value of stock
-Maximizing the market capitalization of the firm
Profit maximization may not lead to the highest possible share price because (check all correct)
- ANS -Timing is important - the receipt of funds sooner rather than later is preferred. Time is
money!
-Profit maximization fails to account for risk - extremely profitable opportunities may be too
risky
-Profits do not necessarily result in cash flows available to stockholders. There is a difference in
accounting values and cash flows.
@2026 ALLRIGHTS RESERVED 2
