Corporate Finance Exam #1 Study Guide

Which of the following was NOT identified by your authors as one of the three main ideas of financial study ?

• business finance

• capital budgeting

• investments

• financial markets and institutions

What is the process of determining which long-term or fixed assets to acquire in an effort to maximize shareholder value ?

• Business Finance

• capital budgeting

• investments

• financial markets and institutions

One of the most important disadvantages of the corporate form of business is:

• limited owner liability

• ease of transferring ownership

• double taxation

• unlimited owner liability

The relationship between risk and expected return is positive

• True

• False

Which of the following banks did not survive the Financial Crisis ?

• Bear Stearns

• JP Morgan

• Goldman Sachs

• Lehman Brothers

A corporation is a(n) ____________ under the law

• Natural Person

• legal robot

• artificial person

• entity with no rights or responsibilities

How does a broker make money ?

• from price appreciation of market securities

• by the difference in the bid and ask price

• by the commission paid by buyers and sellers

• all of the above

________________ act as facilitators in a market, and they bring together buyers and sellers for a transaction

• Dealers

• Brokers

• Advisers

• Comptrollers

_____________ own the securities that they buy or sell; when they engage in a financial transaction, they are trading from their own portfolio. They earn money on the spread between ask and bid prices for the asset.

• Dealers

• Brokers

• Advisers

• Comptrollers

The __________ market is the market for __________ securities, and the ___________ is the market for __________ securities

• primary; used; secondary; new

• secondary; new; primary; new

• primary; new; secondary; used

• secondary; used; primary; used