FIN 300 Quiz 1 (ASU) || Questions and Answers.
Shareholder correct answers Is any party, either an individual, company, or institution, that owns
at least one share of a company and, therefore, has a financial interest in its profitability
Stakeholder correct answers Anyone other than an owner (stockholder) with a claim on the cash
flows on a firm, including employees, suppliers, creditors, and the government
Productive Assets correct answers The long-term tangible and intangible assets a firm uses to
generate cash flows
The Three Fundamental Decisions in Financial Management: correct answers 1. Capital
Budgeting: Identify which long-term assets to acquire to maximize net benefits for the firm
2. Financing: Determine how to pay for short-term and long-term assets by finding the best
combination of short-term debt, long-term debt, and equity
3. Working Capital: Decide how to manage short-term resources and obligations by adjusting
current assets and current liabilities to promote growth in cash flow
(Poor decisions about capital budgeting, financing, or working capital may lead to bankruptcy or
business failure)
Capital Structure correct answers The mix of debt and equity that is used to finance a firm
Money Markets correct answers Global markets where short-term debt instruments, which have
maturities of greater than one year are traded
Capital Markets correct answers Markets where equity and debt instruments with maturities of
greater than one year are traded
Limited Liability correct answers A structure in which the legal liability of an investor is limited
to the amount of capital invested in the business
, Financial Assets correct answers Assets that are claims on the cash flows from other assets;
business loans, stocks, and bonds are financial assets
Real Assets correct answers Non-financial assets such as plant and equipment; productive assets
are real assets; many financial assets are claims on cash flows from real assets
Primary Market: correct answers Wholesale market where firms' new securities are issued and
sold for the first time
Secondary Markets correct answers Retail market where previously issued securities are resold
(traded)
Marketability correct answers The ease with which a security can be sold and converted to cash
Liquidity correct answers The ability to convert an asset into cash quickly without the loss of
value
IPO (initial public offering) correct answers The first offering of a corporation's stock to the
public
What is the goal of the firm according to the textbook? correct answers The goal is maximizing
the wealth of the shareholder
Sarbanes-Oxley Act: correct answers - Focuses on
· Reducing agency costs in corporations
· Restoring ethical conduct within the business sector
· Improving the integrity of the accounting reporting system with firms
1. Ensure greater board independence
2. Establish internal accounting controls
Shareholder correct answers Is any party, either an individual, company, or institution, that owns
at least one share of a company and, therefore, has a financial interest in its profitability
Stakeholder correct answers Anyone other than an owner (stockholder) with a claim on the cash
flows on a firm, including employees, suppliers, creditors, and the government
Productive Assets correct answers The long-term tangible and intangible assets a firm uses to
generate cash flows
The Three Fundamental Decisions in Financial Management: correct answers 1. Capital
Budgeting: Identify which long-term assets to acquire to maximize net benefits for the firm
2. Financing: Determine how to pay for short-term and long-term assets by finding the best
combination of short-term debt, long-term debt, and equity
3. Working Capital: Decide how to manage short-term resources and obligations by adjusting
current assets and current liabilities to promote growth in cash flow
(Poor decisions about capital budgeting, financing, or working capital may lead to bankruptcy or
business failure)
Capital Structure correct answers The mix of debt and equity that is used to finance a firm
Money Markets correct answers Global markets where short-term debt instruments, which have
maturities of greater than one year are traded
Capital Markets correct answers Markets where equity and debt instruments with maturities of
greater than one year are traded
Limited Liability correct answers A structure in which the legal liability of an investor is limited
to the amount of capital invested in the business
, Financial Assets correct answers Assets that are claims on the cash flows from other assets;
business loans, stocks, and bonds are financial assets
Real Assets correct answers Non-financial assets such as plant and equipment; productive assets
are real assets; many financial assets are claims on cash flows from real assets
Primary Market: correct answers Wholesale market where firms' new securities are issued and
sold for the first time
Secondary Markets correct answers Retail market where previously issued securities are resold
(traded)
Marketability correct answers The ease with which a security can be sold and converted to cash
Liquidity correct answers The ability to convert an asset into cash quickly without the loss of
value
IPO (initial public offering) correct answers The first offering of a corporation's stock to the
public
What is the goal of the firm according to the textbook? correct answers The goal is maximizing
the wealth of the shareholder
Sarbanes-Oxley Act: correct answers - Focuses on
· Reducing agency costs in corporations
· Restoring ethical conduct within the business sector
· Improving the integrity of the accounting reporting system with firms
1. Ensure greater board independence
2. Establish internal accounting controls
