Exam (elaborations)
FIN 310 Exam 1 Past Exam Questions And Answers Latest Update
- Module
- FIN 310
- Institution
- American Intercontinental University (AIU)
FIN 310 Exam 1 Past Exam Questions And Answers Latest Update
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Solution 2024/2025Pepper
FIN 310 Exam 1 Past Exam Questions And
Answers Latest Update
Financial Managers make three basic types of decisions: ANS✔✔ -Capital
Budgeting
-Capital Structure
-Working Capital Management
Capital budgeting is... ANS✔✔ the process of planning and managing a
firm's long-term investments
Corporations face double taxation means: ANS✔✔ corporations pay taxes on
income before dividends, while the owners pay personal taxes on dividends
and capital gains.
*Managers should act in shareholders' interests because shareholders have
________ priority in receiving their claims. ANS✔✔ Bottom
What are effective means of aligning management goals with shareholder
interests? ANS✔✔ -Employee stock options
-Threat of a takeover
-Management bonuses tied to performance goals
*Liquidity measures... ANS✔✔ *the speed and ease with which assets can be
converted to cash w/o significant loss of value, and 'fortress' balance sheets
are especially liquid.
, Solution 2024/2025
Pepper
*Even though depreciation is not a cash expense, it affects: ANS✔✔ *taxes!
And corporations prefer to depreciate assets using accelerated over straight
line methods for tax purposes
*The marginal tax rate is... ANS✔✔ *the tax rate payable on the next dollar
earned and is always higher than the average tax rate
Financial ratios help compare over time... ANS✔✔ companies of different
sizes/industries, and since not all sources calculate them the same way,
managers should understand how they are derived.
Asset utilization ratios describe: ANS✔✔ how efficiently, or intensively, a
firm uses its assets to generate sales
To a firm's creditors, particular ST creditors such as suppliers, the _______
the current ratio is, the better. ANS✔✔ Higher
The book value of equity rarely equals the market value of equity except...
ANS✔✔ when the market-to-book ratio is 1.0
The book value of equity... ANS✔✔ -is the residual difference between
assets and liabilities
-the book value of equity decreases when a company pays dividends
The ultimate goal of financial managers is to... ANS✔✔ maximize the current
market value of the company's existing equity
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