Source of Business Finance and Cost of Capital 1

The three key decision areas of the financial manager are:

• Investment decisions, financing decisions, and dividend decisions

• Marketing decisions, production decisions, and HR decisions

• Strategic decisions, operational decisions, and tactical decisions

• Budgeting decisions, accounting decisions, and auditing decisions

Which of the following are key characteristics of equity finance?

• Ownership stake in the company

• Fixed interest payments

• Repayment obligation

• Collateral requirement

Which of the following is involved in corporate finance?

• Provision of resources

• Allocation of resources

• Control of resources

• All of the above

The fundamental aim of financial managers in corporate finance is to:

• maximize shareholder wealth

• minimize costs

• increase market share

• ensure compliance with regulations

Financial accounting and management accounting are two distinct branches of accounting. Which of the following best describes a key difference between them?

• Financial accounting focuses on external reporting, while management accounting focuses on internal decision-making.

• Financial accounting is primarily concerned with budgeting, while management accounting deals with tax preparation.

• Financial accounting is used for strategic planning, while management accounting is used for compliance reporting.

• Financial accounting and management accounting both serve the same purpose and have no differences.

Corporate finance is primarily concerned with:

• Raising funds and providing returns to investors

• Managing day-to-day operations

• Developing marketing strategies

• Overseeing employee performance

Financing decisions in corporate finance involve:

• Determining the best mix of debt and equity financing

• Choosing the right marketing strategy

• Deciding on product pricing

• Selecting the appropriate technology for production

Investment decisions in corporate finance involve:

• allocating resources to long-term assets

• managing short-term financial operations

• determining dividend policies

• setting corporate governance standards

Dividend decisions in corporate finance involve:

• determining the amount of profit to be distributed to shareholders as dividends

• deciding the capital structure of the company

• analyzing the market trends for investment opportunities

• setting the company's long-term strategic goals

Shareholders receive their wealth through ______ and capital gains.

• dividends

• interest

• salaries

• rents