Long-Term Investment – Finance Hw
The key terms of Finance Hw include, Long-term Investment.
Determining the best way to raise money to fund a firms long-term investment is called
the capital structure decisions
The best form of business entity to attract new capital is the sole proprietorship because investors only need to deal with one owner
False
S-type corporations and limited liability companies are taxed like partnerships, but have the advantage of limited liability for their owners
True
If we invest money for 10 years at 8% interest, compounded semi-annually, we are really investing money for 20 six-month periods, and receiving 4% interest each period
True
For a given stated interest rate, an investor would receive a greater future value with daily compounding as opposed monthly compunding
True
The five basic principles of finance include all of the following except:
Incremental profits determine value(included in basic principles: risk requires a reward, cash flow is what matters, money has a time value)
To measure vale, the concept of time value of money is used
To bring the future benefits and cost of a project, measure by its cash flows, back to the present
All of the following contributed to recent financial crises except:
relying on the efficiency of financial markets
Executive compensation in the U.S
is dominated by performance-based compensation designed to reduce agency problems
The recent financial crises was exacerbated by
managers who underestimated the real risks of their decisions and borrowed excessively
Financial management deals with the maintenance and creation of economic value or wealth
True
The fundamental goal of a business is to maximize the retained earnings available to the corporations shareholders
False
Shareholder wealth maximization means maximizing the price of the existing common stock
True
Ethical behavior
is essential in business because unethical behavior destroys trust and business relationships
Investors generally don’t like risk, Therefore, a typical investor
will only take an additional risk if he expects to be compensated in the form of additional returen
A corporate treasurer is typically responsible for cash management, credit management, and raising capital
True
Determining how a firm should raise money to fund its long-term investments is referred to as capital structure decisions
True
The Chief Financial Officer (CFO) is responsible for overseeing financial planning, corporate strategic planning, and controlling the firms cash flow
True
The financial manager most directly responsible for producing the company’s financial statements and directing its cost accounting functions is the:
controller
The three basic types of issues addressed by the study of finances are
capital budgeting, capital structure decisions, and working capital management
Working capital management is concerned with
how a firm can best manage its cash flows as they arise in its day-to-day operations
Capital budgeting is concerned with
what long-term investments a firm should undertake
Determining the best way to raise money to fund a firms long-term investment is called
the capital structure decisions
The best form of business entity to attract new capital is the sole proprietorship because investors only need to deal with one owner
False
S-type corporations and limited liability companies are taxed like partnerships, but have the advantage of limited liability for their owners
True
If we invest money for 10 years at 8% interest, compounded semi-annually, we are really investing money for 20 six-month periods, and receiving 4% interest each period
True
For a given stated interest rate, an investor would receive a greater future value with daily compounding as opposed monthly compunding
True