1|Page
FINANCE 300 ( CSULB YULONG MA) EXAM 1
CHPT 1, 4, 5 QUESTIONS AND ANSWERS 2025
Stakeholder Theory - ...ANSWER... ✔ ✔A theory
that holds that social responsibility is paying attention
to the interest of every affected stakeholder in every
aspect of a firm's operation
Decisions made by Financial Management -
...ANSWER... ✔ ✔- Capital budgeting decisions:
Identifying the productive assets the firm should buy.
- Financing decisions: Determining how the firm should
finance or pay for assets.
Working capital management decisions: - Determining
how day-to-day financial matters should be managed
so that the firm can pay its bills, and how surplus cash
should be invested.
5 Principles of Finance - ...ANSWER... ✔ ✔1. Money
has a time value
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2. There is a risk-return tradeoff
3. Cash flows are the source of value
4. Market prices reflect information
5. Individuals respond to incentives
Goals of Financial Manager - ...ANSWER... ✔ ✔1.
Survive
2. Avoid Bankruptcy
3. Beat the comp
4. Avoid Financial Stress
5. Max sales of market share
Working Capital - ...ANSWER... ✔ ✔the managing of
short-term assets and liabilities
day to day
working capital management decisions - ...ANSWER...
✔ ✔Deal with day-to-day financial matters and
affect current assets, current liabilities
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Corporations - ...ANSWER... ✔ ✔a legal entity
authorized under a state charter. In a legal sense, it is a
"person" distinct from its owners.
Public Market (Corporations) - ...ANSWER... ✔
✔large amounts of capital can be raised in public
markets at a relatively low cost.
privately held, or closely held, corporations -
...ANSWER... ✔ ✔whose stock/shares are not
traded publicly
Goals of the firm - ...ANSWER... ✔ ✔maximize the
value of a firms stock
Agency Relationship - ...ANSWER... ✔ ✔relationship
between stockholders and management
Agency Conflict - ...ANSWER... ✔ ✔Conflict of
interest between principal and agent
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Agency Costs - ...ANSWER... ✔ ✔the cost arising
from conflicts between principal and an agent
Sarbanes-Oxley Act of 2002 Regulations - ...ANSWER...
✔ ✔1. Ensure greater board independence
2. establish internal acc controls
3. establish compliance programs
4. establish an ethics program
5. expand audit committees oversight program
Sarbanes-Oxley Act of 2002 Key takeaways -
...ANSWER... ✔ ✔1. came out in response to highly
publicized corp financial standards
2. act created strict new rules for acc., auditors, corp
officers, and imposed more stringent record keeping
requirements
3. added new criminal penalties for violating securities
laws
4. attempted to restore ethical conduct within business
sector
FINANCE 300 ( CSULB YULONG MA) EXAM 1
CHPT 1, 4, 5 QUESTIONS AND ANSWERS 2025
Stakeholder Theory - ...ANSWER... ✔ ✔A theory
that holds that social responsibility is paying attention
to the interest of every affected stakeholder in every
aspect of a firm's operation
Decisions made by Financial Management -
...ANSWER... ✔ ✔- Capital budgeting decisions:
Identifying the productive assets the firm should buy.
- Financing decisions: Determining how the firm should
finance or pay for assets.
Working capital management decisions: - Determining
how day-to-day financial matters should be managed
so that the firm can pay its bills, and how surplus cash
should be invested.
5 Principles of Finance - ...ANSWER... ✔ ✔1. Money
has a time value
,2|Page
2. There is a risk-return tradeoff
3. Cash flows are the source of value
4. Market prices reflect information
5. Individuals respond to incentives
Goals of Financial Manager - ...ANSWER... ✔ ✔1.
Survive
2. Avoid Bankruptcy
3. Beat the comp
4. Avoid Financial Stress
5. Max sales of market share
Working Capital - ...ANSWER... ✔ ✔the managing of
short-term assets and liabilities
day to day
working capital management decisions - ...ANSWER...
✔ ✔Deal with day-to-day financial matters and
affect current assets, current liabilities
,3|Page
Corporations - ...ANSWER... ✔ ✔a legal entity
authorized under a state charter. In a legal sense, it is a
"person" distinct from its owners.
Public Market (Corporations) - ...ANSWER... ✔
✔large amounts of capital can be raised in public
markets at a relatively low cost.
privately held, or closely held, corporations -
...ANSWER... ✔ ✔whose stock/shares are not
traded publicly
Goals of the firm - ...ANSWER... ✔ ✔maximize the
value of a firms stock
Agency Relationship - ...ANSWER... ✔ ✔relationship
between stockholders and management
Agency Conflict - ...ANSWER... ✔ ✔Conflict of
interest between principal and agent
, 4|Page
Agency Costs - ...ANSWER... ✔ ✔the cost arising
from conflicts between principal and an agent
Sarbanes-Oxley Act of 2002 Regulations - ...ANSWER...
✔ ✔1. Ensure greater board independence
2. establish internal acc controls
3. establish compliance programs
4. establish an ethics program
5. expand audit committees oversight program
Sarbanes-Oxley Act of 2002 Key takeaways -
...ANSWER... ✔ ✔1. came out in response to highly
publicized corp financial standards
2. act created strict new rules for acc., auditors, corp
officers, and imposed more stringent record keeping
requirements
3. added new criminal penalties for violating securities
laws
4. attempted to restore ethical conduct within business
sector
