©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
Fin 310 Final Exam Questions 100% Solved.
Which of the following statements is false?
a. the book value of equity is the residual difference between assets and libiliities
b. the book value of equity increase when a company pays dividends
c. the ultimate goal of financial managers its ti maximize the current market value of the
company existing equity
d. the book value of equity rarely equals the market value of equity expect when the market to
book ratio is 1.0 - answer✔b. the book value of equity increases when a company pays dividends
all other statements are true
which of the following transactions would NOT take place in a primary finical market -
answer✔c. when a mutual fund security buys NYSE
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
of the stakeholders, the ___ have the highest priority, while ___ have the lowest priority -
answer✔customers, shareholders
which of the following statements is true? - answer✔time interest earned, also known as the
interest coverage ratio, provides a relative measure of how well a firm can service its debt
which of the following is NOT an effective mean of aligning management goals with
shareholders interests? - answer✔compensating managers with salaries significantly hiring than
their peers.
firms that compile finance statements according to GAAP: - answer✔can still manipulate their
earnings to some degree
which of the following is TRUE about bonds? - answer✔both premium and discount bonds tend
to converge to face value maturity
you have another cousin, damon. he's an eleven-year-old, and he asks a lot of questions at
Thanksgiving. a little bit too many, but he's harmless so everybody goes along with it. he hears
that you are a business major. he asks you what a balance sheet is - how do you reply? -
answer✔a balance sheet is a financial statement that lists the book value of a company's assets,
liabilities, and equity. the items are listed in descending scale in terms of liquidity, or ease of
conversion to cash.
your cousin thinks that answer was good, but not great. He wants to know more, so he follows up
and asks you what an income statement is - what do you say? - answer✔an income statement
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
lists all of the companies revenues, minus all of it's expenses in order to arrive at a net income
figure. Revenue comes from sales to your customers, while expenses come from a variety of
sources like payroll, product costs, research costs, rent, taxes, etc.
which of the following statements is TRUE? - answer✔all stock trades between existing
shareholders are secondary market transactions.
which one of the following is most apt to align management's priorities with shareholders'
interests? - answer✔compensating managers with shares of stock that must be held for 3 years
before the shares can be sold
which of the following statements is FALSE? - answer✔managers should use the average tax
rate when making decisions regarding new investments and financing choices.
if any, which of the following statements is FALSE?
a. capital budgeting is the process of planning and managing a firm's long-term investments
where managers identify investments that are worth more than they cost to acquire.
b. capital structure is the mix of debt and equity maintained by a firm to finance operations,
where the firm decides how much to borrow and what the cheapest sources of funds are.
c. working capital management is the day-to-day management of finances that determines how
much cash and inventory should be kept on hand, whether to sell on credit to customers, and how
to obtain short-term financing.
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
d. none of the above statements is false. - answer✔d. none of the above statements is false.
rank the stakeholders by priority: suppliers, owners, government, creditors, customers, and
employees - answer✔customers are first
You have a buddy who recently opened a Robinhood account to buy and sell stocks. He conducts
some research on Ford and Tesla and makes the comment to you "I think I am going to buy Ford
because it's share price is only $9.41 compared to Tesla's $245.87 and there's no way that Tesla
is 26x more valuable." Can you tell him what's wrong with that statement? - answer✔He's wrong
because the share price is partly due to how many share's outstanding the company has. For
example, Ford has nearly 4 billion shares outstanding, while Tesla only has around 200 million -
which results in the vastly different share prices. To determine what the market value of a
company is, you should look at the market capitalization.
Tesla's earnings per share is negative. Why do you think investors are willing to pay for a
company that has negative net income? - answer✔people are willing to invest money in a
company that is not CURRENTLY making a profit if they believe it will make a profit in the
FUTURE. In future chapters, we will talk more about how to value companies - many of which
lose money during their early growth phase.
Between these two companies, which one would you invest in? - answer✔No correct answer
here! That's the beauty of the stock market. You take risks with the hope that it pays off. In my
opinion (Tate speaking here), I think you should invest in companies that you feel are making a
10/11/2024 1:41 PM
Fin 310 Final Exam Questions 100% Solved.
Which of the following statements is false?
a. the book value of equity is the residual difference between assets and libiliities
b. the book value of equity increase when a company pays dividends
c. the ultimate goal of financial managers its ti maximize the current market value of the
company existing equity
d. the book value of equity rarely equals the market value of equity expect when the market to
book ratio is 1.0 - answer✔b. the book value of equity increases when a company pays dividends
all other statements are true
which of the following transactions would NOT take place in a primary finical market -
answer✔c. when a mutual fund security buys NYSE
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
of the stakeholders, the ___ have the highest priority, while ___ have the lowest priority -
answer✔customers, shareholders
which of the following statements is true? - answer✔time interest earned, also known as the
interest coverage ratio, provides a relative measure of how well a firm can service its debt
which of the following is NOT an effective mean of aligning management goals with
shareholders interests? - answer✔compensating managers with salaries significantly hiring than
their peers.
firms that compile finance statements according to GAAP: - answer✔can still manipulate their
earnings to some degree
which of the following is TRUE about bonds? - answer✔both premium and discount bonds tend
to converge to face value maturity
you have another cousin, damon. he's an eleven-year-old, and he asks a lot of questions at
Thanksgiving. a little bit too many, but he's harmless so everybody goes along with it. he hears
that you are a business major. he asks you what a balance sheet is - how do you reply? -
answer✔a balance sheet is a financial statement that lists the book value of a company's assets,
liabilities, and equity. the items are listed in descending scale in terms of liquidity, or ease of
conversion to cash.
your cousin thinks that answer was good, but not great. He wants to know more, so he follows up
and asks you what an income statement is - what do you say? - answer✔an income statement
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
lists all of the companies revenues, minus all of it's expenses in order to arrive at a net income
figure. Revenue comes from sales to your customers, while expenses come from a variety of
sources like payroll, product costs, research costs, rent, taxes, etc.
which of the following statements is TRUE? - answer✔all stock trades between existing
shareholders are secondary market transactions.
which one of the following is most apt to align management's priorities with shareholders'
interests? - answer✔compensating managers with shares of stock that must be held for 3 years
before the shares can be sold
which of the following statements is FALSE? - answer✔managers should use the average tax
rate when making decisions regarding new investments and financing choices.
if any, which of the following statements is FALSE?
a. capital budgeting is the process of planning and managing a firm's long-term investments
where managers identify investments that are worth more than they cost to acquire.
b. capital structure is the mix of debt and equity maintained by a firm to finance operations,
where the firm decides how much to borrow and what the cheapest sources of funds are.
c. working capital management is the day-to-day management of finances that determines how
much cash and inventory should be kept on hand, whether to sell on credit to customers, and how
to obtain short-term financing.
, ©SIRJOEL EXAM SOLUTIONS
10/11/2024 1:41 PM
d. none of the above statements is false. - answer✔d. none of the above statements is false.
rank the stakeholders by priority: suppliers, owners, government, creditors, customers, and
employees - answer✔customers are first
You have a buddy who recently opened a Robinhood account to buy and sell stocks. He conducts
some research on Ford and Tesla and makes the comment to you "I think I am going to buy Ford
because it's share price is only $9.41 compared to Tesla's $245.87 and there's no way that Tesla
is 26x more valuable." Can you tell him what's wrong with that statement? - answer✔He's wrong
because the share price is partly due to how many share's outstanding the company has. For
example, Ford has nearly 4 billion shares outstanding, while Tesla only has around 200 million -
which results in the vastly different share prices. To determine what the market value of a
company is, you should look at the market capitalization.
Tesla's earnings per share is negative. Why do you think investors are willing to pay for a
company that has negative net income? - answer✔people are willing to invest money in a
company that is not CURRENTLY making a profit if they believe it will make a profit in the
FUTURE. In future chapters, we will talk more about how to value companies - many of which
lose money during their early growth phase.
Between these two companies, which one would you invest in? - answer✔No correct answer
here! That's the beauty of the stock market. You take risks with the hope that it pays off. In my
opinion (Tate speaking here), I think you should invest in companies that you feel are making a
