Test Bank Complete_ Fundamentals of Corporate
Finance 13th Edition, (2021) By Stephen A. Ross,
Randolph W. Westerfield & Bradford D. Jordan |
Verified All Chapters 1-27| Newest Version
Who makes financing decisions - ANSWERThe CEO, CFO, and their team/financial
manager
What is corporate finance - ANSWERThe long term investments of a firm that works
to generate more money
How do you pay for investments? - ANSWERYou can reinvest profits, issue bonds, or
sell equity (a portion of the company that is sold through stocks)
How do you manage everyday financial decisions? - ANSWERThrough cash flow
management and through lines of credit (accounts receivable and accounts payable)
What is always the goal of the firm? - ANSWERTo maximize shareholder value
Who owns a corporation? - ANSWERThe shareholders
How do shareholders control the corporation? - ANSWERShareholders hire the
board, the board hires the managers, and the managers hire the employees
What is the agency problem? - ANSWERIt happens when the interests of you and
who you hired are not aligned. It's a conflict between the shareholders and
managers/CEO
How do you fix the agency problem? - ANSWEREither by adjusting the managers
compensation or by removing the board or managers by shareholders
How do financial managers pay for things? - ANSWERThrough financial markets
(stocks, bonds, or retained earnings)
What are the financial markets? - ANSWERThere is a stock market and a bond
market. The stock market is where ownership stakes in companies are sold, and the
bond market is when you borrow money to pay back later.
What is important to know about the stock market? - ANSWERThere are primary and
secondary markets. The primary market involves IPOs and the company gets money.
The secondary market is regular people buying stocks
What is the IPO and what market is it involved in? - ANSWERInitial Public Offering is
the first time a company goes public and sells stocks; it's part of the primary market
Finance 13th Edition, (2021) By Stephen A. Ross,
Randolph W. Westerfield & Bradford D. Jordan |
Verified All Chapters 1-27| Newest Version
Who makes financing decisions - ANSWERThe CEO, CFO, and their team/financial
manager
What is corporate finance - ANSWERThe long term investments of a firm that works
to generate more money
How do you pay for investments? - ANSWERYou can reinvest profits, issue bonds, or
sell equity (a portion of the company that is sold through stocks)
How do you manage everyday financial decisions? - ANSWERThrough cash flow
management and through lines of credit (accounts receivable and accounts payable)
What is always the goal of the firm? - ANSWERTo maximize shareholder value
Who owns a corporation? - ANSWERThe shareholders
How do shareholders control the corporation? - ANSWERShareholders hire the
board, the board hires the managers, and the managers hire the employees
What is the agency problem? - ANSWERIt happens when the interests of you and
who you hired are not aligned. It's a conflict between the shareholders and
managers/CEO
How do you fix the agency problem? - ANSWEREither by adjusting the managers
compensation or by removing the board or managers by shareholders
How do financial managers pay for things? - ANSWERThrough financial markets
(stocks, bonds, or retained earnings)
What are the financial markets? - ANSWERThere is a stock market and a bond
market. The stock market is where ownership stakes in companies are sold, and the
bond market is when you borrow money to pay back later.
What is important to know about the stock market? - ANSWERThere are primary and
secondary markets. The primary market involves IPOs and the company gets money.
The secondary market is regular people buying stocks
What is the IPO and what market is it involved in? - ANSWERInitial Public Offering is
the first time a company goes public and sells stocks; it's part of the primary market
