FIN 301- MANAGERIAL FINANCE
EXAM 1 QUESTIONS & ACCURATE
COMPLETE ANSWERS PASSED
Capital Budgeting - Correct Answer ✔✔ the process of planning and managing a firm's
long-term investments
Capital Structure - Correct Answer ✔✔ the mixture of debt and equity maintained by a
firm
Working Capital - Correct Answer ✔✔ a firm's short-term assets and liabilities.
Sole Proprietorship - Correct Answer ✔✔ a business owned by a single individual
Partnership - Correct Answer ✔✔ a business formed by two or more individuals or
entities
Corporation - Correct Answer ✔✔ a business created as a distinct legal entity
composed of one or more individuals or entities
Agency Relationships - Correct Answer ✔✔ The relationship between stockholders and
management
Agency Problems - Correct Answer ✔✔ the possibility of conflict of interest between the
stockholders and management of a firm
Agency Costs - Correct Answer ✔✔ the costs of the conflict of interest between
stockholders and management (direct or indirect)
Direct Agency Costs - Correct Answer ✔✔ corporate expenditure or expense that arises
from the need to monitor management actions
Restricted Stock Unit (RSU) - Correct Answer ✔✔ a restricted stock unit, or RSU, is
issued to an employee, but is distributed only when it vests. The vesting generally
requires a performance milestone or length of service
Proxy Fight - Correct Answer ✔✔ an important mechanism by which unhappy
stockholders can act to replace existing management
Stakeholders - Correct Answer ✔✔ someone other than a stockholder or creditor who
potentially has a claim on the cash flows of the firm
, Primary Markets - Correct Answer ✔✔ The corporation is the seller, and the transaction
raises money for the corporation
Secondary Markets - Correct Answer ✔✔ Involves one owner or creditor selling to
another
Balance Sheet - Correct Answer ✔✔ financial statement showing a firm's accounting
value on a particular date
Stockholders' Equity - Correct Answer ✔✔ if the firm were to sell all of its assets and
use the money to pay off its debts, then whatever the residual value remained would
belong to the shareholders
Net Working Capital - Correct Answer ✔✔ current assets less than current liabilities
Financial Leverage - Correct Answer ✔✔ the use of debt in a firm's capital structure
Generally Accepted Accounting Principles (GAAP) - Correct Answer ✔✔ the common
set of standards and procedures by which audited financial statements are prepared
Book Value - Correct Answer ✔✔ what an asset is actually worth and the difference
indicates a GAIN or a LOSS when sold
Market Value - Correct Answer ✔✔ depends on things like its riskiness and cash flows
Liquidity - Correct Answer ✔✔ the speed and ease with which an asset can be
converted to cash
Income Statement - Correct Answer ✔✔ financial statement summarizing a firm's
performance over a period of time
Non Cash Items - Correct Answer ✔✔ expenses charged against revenues that do not
directly affect cash flow, such as depreciation
Product Costs - Correct Answer ✔✔ things such as raw materials, direct labor expense,
and manufacturing overhead
Period Costs - Correct Answer ✔✔ incurred during a particular time period and might be
reported as selling, general, and administrative expenses
Average Tax Rate - Correct Answer ✔✔ total taxes paid dividend by total taxable
income
Marginal Tax Rate - Correct Answer ✔✔ amount of tax payable on the next dollar
earned
EXAM 1 QUESTIONS & ACCURATE
COMPLETE ANSWERS PASSED
Capital Budgeting - Correct Answer ✔✔ the process of planning and managing a firm's
long-term investments
Capital Structure - Correct Answer ✔✔ the mixture of debt and equity maintained by a
firm
Working Capital - Correct Answer ✔✔ a firm's short-term assets and liabilities.
Sole Proprietorship - Correct Answer ✔✔ a business owned by a single individual
Partnership - Correct Answer ✔✔ a business formed by two or more individuals or
entities
Corporation - Correct Answer ✔✔ a business created as a distinct legal entity
composed of one or more individuals or entities
Agency Relationships - Correct Answer ✔✔ The relationship between stockholders and
management
Agency Problems - Correct Answer ✔✔ the possibility of conflict of interest between the
stockholders and management of a firm
Agency Costs - Correct Answer ✔✔ the costs of the conflict of interest between
stockholders and management (direct or indirect)
Direct Agency Costs - Correct Answer ✔✔ corporate expenditure or expense that arises
from the need to monitor management actions
Restricted Stock Unit (RSU) - Correct Answer ✔✔ a restricted stock unit, or RSU, is
issued to an employee, but is distributed only when it vests. The vesting generally
requires a performance milestone or length of service
Proxy Fight - Correct Answer ✔✔ an important mechanism by which unhappy
stockholders can act to replace existing management
Stakeholders - Correct Answer ✔✔ someone other than a stockholder or creditor who
potentially has a claim on the cash flows of the firm
, Primary Markets - Correct Answer ✔✔ The corporation is the seller, and the transaction
raises money for the corporation
Secondary Markets - Correct Answer ✔✔ Involves one owner or creditor selling to
another
Balance Sheet - Correct Answer ✔✔ financial statement showing a firm's accounting
value on a particular date
Stockholders' Equity - Correct Answer ✔✔ if the firm were to sell all of its assets and
use the money to pay off its debts, then whatever the residual value remained would
belong to the shareholders
Net Working Capital - Correct Answer ✔✔ current assets less than current liabilities
Financial Leverage - Correct Answer ✔✔ the use of debt in a firm's capital structure
Generally Accepted Accounting Principles (GAAP) - Correct Answer ✔✔ the common
set of standards and procedures by which audited financial statements are prepared
Book Value - Correct Answer ✔✔ what an asset is actually worth and the difference
indicates a GAIN or a LOSS when sold
Market Value - Correct Answer ✔✔ depends on things like its riskiness and cash flows
Liquidity - Correct Answer ✔✔ the speed and ease with which an asset can be
converted to cash
Income Statement - Correct Answer ✔✔ financial statement summarizing a firm's
performance over a period of time
Non Cash Items - Correct Answer ✔✔ expenses charged against revenues that do not
directly affect cash flow, such as depreciation
Product Costs - Correct Answer ✔✔ things such as raw materials, direct labor expense,
and manufacturing overhead
Period Costs - Correct Answer ✔✔ incurred during a particular time period and might be
reported as selling, general, and administrative expenses
Average Tax Rate - Correct Answer ✔✔ total taxes paid dividend by total taxable
income
Marginal Tax Rate - Correct Answer ✔✔ amount of tax payable on the next dollar
earned
