FIN Exam 1 Study Guide – Financial Management Key Concepts, Formulas and
Practice Review
_______: A business organization; a collection of assets to be used in production - ANS ✔✔Firm
What are the 3 different types of business organizations? - ANS ✔✔Sole proprietorship,
Partnership, Corporation
_______: Business owned by one person - ANS ✔✔Sole proprietorship
_____: Unincorporated business with multiple owners - ANS ✔✔Partnership
Advantages of _______ and _______:
- Ease of start up
- Single taxation - ANS ✔✔Sole proprietorship, Partnership
Disadvantages of ______ and ______:
- Limited life
- Hard to transfer ownership
- Limited capital
- Unlimited liability - ANS ✔✔Sole proprietorship, Partnership
_______: Cash put into a business to help it operate - ANS ✔✔Capital
What are the 2 forms of capital? - ANS ✔✔Equity, Debt
, _______: Distinct legal entity; legally a "person" - ANS ✔✔Corporation
______: Owners of a corporation - ANS ✔✔Shareholders
Advantages of ______:
- Limited liability
- Ease to transfer ownership (unlimited life)
- Ease of raising capital - ANS ✔✔Corporation
Disadvantages of ______:
- Double taxation (taxed on business level and personal level)
- Separation of ownership and management (management may not make all decisions in the
owners' best interest) - ANS ✔✔Corporation
What are the 3 main important areas of decision-making? - ANS ✔✔Working Capital
Management, Capital Budgeting, Capital Structure
______: Area of decision-making that deals with managing everyday financial activities of the
firm - ANS ✔✔Working capital management
______: Area of decision-making that deals with deciding what long-term investments the firm
takes on - ANS ✔✔Capital budgeting
______: Area of decision-making that deals with deciding what long-term funding the firm will
use - ANS ✔✔Capital structure
Choose an area of decision-making for: What credit terms should we offer to customers? - ANS
✔✔Working capital management
Practice Review
_______: A business organization; a collection of assets to be used in production - ANS ✔✔Firm
What are the 3 different types of business organizations? - ANS ✔✔Sole proprietorship,
Partnership, Corporation
_______: Business owned by one person - ANS ✔✔Sole proprietorship
_____: Unincorporated business with multiple owners - ANS ✔✔Partnership
Advantages of _______ and _______:
- Ease of start up
- Single taxation - ANS ✔✔Sole proprietorship, Partnership
Disadvantages of ______ and ______:
- Limited life
- Hard to transfer ownership
- Limited capital
- Unlimited liability - ANS ✔✔Sole proprietorship, Partnership
_______: Cash put into a business to help it operate - ANS ✔✔Capital
What are the 2 forms of capital? - ANS ✔✔Equity, Debt
, _______: Distinct legal entity; legally a "person" - ANS ✔✔Corporation
______: Owners of a corporation - ANS ✔✔Shareholders
Advantages of ______:
- Limited liability
- Ease to transfer ownership (unlimited life)
- Ease of raising capital - ANS ✔✔Corporation
Disadvantages of ______:
- Double taxation (taxed on business level and personal level)
- Separation of ownership and management (management may not make all decisions in the
owners' best interest) - ANS ✔✔Corporation
What are the 3 main important areas of decision-making? - ANS ✔✔Working Capital
Management, Capital Budgeting, Capital Structure
______: Area of decision-making that deals with managing everyday financial activities of the
firm - ANS ✔✔Working capital management
______: Area of decision-making that deals with deciding what long-term investments the firm
takes on - ANS ✔✔Capital budgeting
______: Area of decision-making that deals with deciding what long-term funding the firm will
use - ANS ✔✔Capital structure
Choose an area of decision-making for: What credit terms should we offer to customers? - ANS
✔✔Working capital management
