WINGENDER FIN 301 EXAM 1
QUESTIONS & UPDATED ANSWERS
RATED 100% CORRECT
Important questions that are answered using finance - Correct Answer ✔✔ - What long-
term investments should the firm take on?
- Where will we get the long-term financing to pay for the investment?
- How will we manage the everyday financial activities of the firm?
Who tries to answer some or all of these questions? - Correct Answer ✔✔ financial
managers
Chief Financial Officer (CFO) or Vice President of Finance (VPF) - Correct Answer ✔✔
The top financial manager within a firm
Treasurer - Correct Answer ✔✔ oversees cash management, credit management,
capital expenditures, and financial planning
Controller - Correct Answer ✔✔ oversees taxes, cost accounting, financial accounting
and data processing
Capital Budgeting - Correct Answer ✔✔ process of planning and managing a firm's
investments in fixed assets. The key concerns are the size, timing, and riskiness of
future cash flows (What long-term investments or projects should the business take
on?)
Capital Structure - Correct Answer ✔✔ ix of debt (borrowing) and equity (ownership
interest) used by a firm. What are the least expensive sources of funds? Is there an
optimal mix of debt and equity? When and where should the firm raise funds? How
should we pay for our assets? Should we use debt or equity?
Working Capital Management - Correct Answer ✔✔ managing short-term assets and
liabilities. How much inventory should the firm carry? What credit policy is best? Where
will we get our short-term loans? How do we manage the day-to-day finances of the
firm?
Sole Proprietorship, Partnership (General & Limited), & Corporation (LLC) - Correct
Answer ✔✔ Three major forms of business organization in the United States
Sole Proprietorship - Correct Answer ✔✔ A business owned by a single individual
, Partnership - Correct Answer ✔✔ A business formed by two or more individuals or
entities
General Partnership - Correct Answer ✔✔ all the partners share in gains or losses, and
all have unlimited liability for all partnership debts, not just some particular share
Partnership Agreement - Correct Answer ✔✔ an informal oral or formal agreement that
describes the way partnership gains (and losses) are divided
Limited Partnership - Correct Answer ✔✔ - one or more general partners will run the
business and have unlimited liability, but there will be one or more limited partners who
will not actively participate in the business
- a limited partner's liability for business debts is limited to the amount that partner
contributes to the partnership
- common in real estate ventures
Corporation - Correct Answer ✔✔ - a business created as a distinct legal entity
composed of one or more individuals or entities
- the most important form (in terms of size) of business organization in the United States
- acorporation is a legal "person," separate and distinct from its owners,
Limited Liability Company (LLC) - Correct Answer ✔✔ - a form of business ownership
that offers both limited liability to its owners and flexible tax treatment
- the goal of this entity is to operate and be taxed like a partnership but retain limited
liability for owners
- a hybrid of partnership and corporation
- falls under corporation
Advantages of Sole Proprietorship - Correct Answer ✔✔ - Easiest to start
- Least regulated
- Single owner keeps all the profits
- Taxed once as personal income
Disadvantages of Sole Proprietorship - Correct Answer ✔✔ - Limited to life of owner
- Equity capital limited to owner's personal wealth
- Unlimited liability
- Difficult to sell ownership interest
Advantages of a Partnership - Correct Answer ✔✔ - Two or more owners
- More capital available
- Relatively easy to start
- Income taxed once as personal income
Disadvantages of a Partnership - Correct Answer ✔✔ - Unlimited liability
- General partnership
- Limited partnership
QUESTIONS & UPDATED ANSWERS
RATED 100% CORRECT
Important questions that are answered using finance - Correct Answer ✔✔ - What long-
term investments should the firm take on?
- Where will we get the long-term financing to pay for the investment?
- How will we manage the everyday financial activities of the firm?
Who tries to answer some or all of these questions? - Correct Answer ✔✔ financial
managers
Chief Financial Officer (CFO) or Vice President of Finance (VPF) - Correct Answer ✔✔
The top financial manager within a firm
Treasurer - Correct Answer ✔✔ oversees cash management, credit management,
capital expenditures, and financial planning
Controller - Correct Answer ✔✔ oversees taxes, cost accounting, financial accounting
and data processing
Capital Budgeting - Correct Answer ✔✔ process of planning and managing a firm's
investments in fixed assets. The key concerns are the size, timing, and riskiness of
future cash flows (What long-term investments or projects should the business take
on?)
Capital Structure - Correct Answer ✔✔ ix of debt (borrowing) and equity (ownership
interest) used by a firm. What are the least expensive sources of funds? Is there an
optimal mix of debt and equity? When and where should the firm raise funds? How
should we pay for our assets? Should we use debt or equity?
Working Capital Management - Correct Answer ✔✔ managing short-term assets and
liabilities. How much inventory should the firm carry? What credit policy is best? Where
will we get our short-term loans? How do we manage the day-to-day finances of the
firm?
Sole Proprietorship, Partnership (General & Limited), & Corporation (LLC) - Correct
Answer ✔✔ Three major forms of business organization in the United States
Sole Proprietorship - Correct Answer ✔✔ A business owned by a single individual
, Partnership - Correct Answer ✔✔ A business formed by two or more individuals or
entities
General Partnership - Correct Answer ✔✔ all the partners share in gains or losses, and
all have unlimited liability for all partnership debts, not just some particular share
Partnership Agreement - Correct Answer ✔✔ an informal oral or formal agreement that
describes the way partnership gains (and losses) are divided
Limited Partnership - Correct Answer ✔✔ - one or more general partners will run the
business and have unlimited liability, but there will be one or more limited partners who
will not actively participate in the business
- a limited partner's liability for business debts is limited to the amount that partner
contributes to the partnership
- common in real estate ventures
Corporation - Correct Answer ✔✔ - a business created as a distinct legal entity
composed of one or more individuals or entities
- the most important form (in terms of size) of business organization in the United States
- acorporation is a legal "person," separate and distinct from its owners,
Limited Liability Company (LLC) - Correct Answer ✔✔ - a form of business ownership
that offers both limited liability to its owners and flexible tax treatment
- the goal of this entity is to operate and be taxed like a partnership but retain limited
liability for owners
- a hybrid of partnership and corporation
- falls under corporation
Advantages of Sole Proprietorship - Correct Answer ✔✔ - Easiest to start
- Least regulated
- Single owner keeps all the profits
- Taxed once as personal income
Disadvantages of Sole Proprietorship - Correct Answer ✔✔ - Limited to life of owner
- Equity capital limited to owner's personal wealth
- Unlimited liability
- Difficult to sell ownership interest
Advantages of a Partnership - Correct Answer ✔✔ - Two or more owners
- More capital available
- Relatively easy to start
- Income taxed once as personal income
Disadvantages of a Partnership - Correct Answer ✔✔ - Unlimited liability
- General partnership
- Limited partnership
