Corporate Finance Chapter 1 Quiz

Introduction

• Study guide is split into two parts
  • Part 1: General information about Core Principles subjects
  • Part 2: Specific information about Subject CB1
• Refer to the guide throughout your Subject CB1 journey

Overall study plan

• Develop a realistic study plan, including time for relaxation and contingencies
• Be aware of busy times at work
• Stick to your study plan

Study sessions

• Only do activities that will increase your chance of passing
• Avoid activities for the sake of it
• Do not spend time reviewing material you already understand
• Focus on getting on top of material you find difficult

Chapter 1: Introduction to Corporate Finance

• 1.2: Describe the key principles of corporate governance and the regulation of companies.
• 1.3: Demonstrate an awareness of the key principles of finance.
  • 1.3.1: Outline the relationship between finance and the real resources and objectives of an organisation.
  • 1.3.2: Outline the relationship between the stakeholders in an organisation (including lenders and investors).
  • 1.3.3: Outline the role and effects of the capital markets.
  • 1.3.4: Outline the maximisation of shareholder wealth as the main goal of financial management in a company.
  • 1.3.5: Outline problems relating to the maximisation of shareholder wealth in practice: social responsibility concerns, agency problems and divergent objectives.
  • 1.3.6: Outline the strategies employed by managers to maximize shareholder wealth.
  • 1.3.7: Outline the determinants of value and the actions managers can take to influence value.

Chapter 2: How corporates are financed

• 2.1: Describe the structure of a company and the different methods by which it may be financed.
  • 2.1.1: Outline the distinctive characteristics of sole traders, partnerships and limited companies as business entities.
  • 2.1.2: Describe the different types of loan and share capital.
  • 2.1.3: Contrast authorised and issued share capital.
  • 2.1.4: Discuss the economic advantages and disadvantages of a limited company as a business entity.
  • 2.1.5: Outline the main differences between a private and public company.

Chapter 4: Share Capital

• 2.1.2: Describe the different types of loan and share capital.
• 2.1.3: Contrast authorised and issued share capital.

Chapter 5: New Issues

• 2.3.4: Outline the following methods of obtaining a quotation for securities:
  • Offer for sale
  • Offer for sale by tender
  • Offer for subscription
  • Placing
  • Introduction
• 2.3.5: Describe the following types of new issues to existing shareholders:
  • Scrip issue
  • Rights issue
• 2.3.6: Describe the role of underwriting in the issue of securities.

Chapter 8: Financial Instruments

• 2.3.3: Describe the characteristics and possible uses by a non-financial company of:
  • Financial futures
  • Options
  • Interest rate and currency swaps.

Chapter 20: Capital Structure and Dividend Policy

• 2.4: Discuss the factors to be considered by a company when deciding on its capital structure and dividend policy.
  • 2.4.1: Describe the effect that the capital structure used by a company will have on the market valuation of the company.
  • 2.4.2: Describe the effect of taxation on the capital structure used by a company.
  • 2.4.3: Discuss the principal factors that a company should consider in setting dividend policy.
  • 2.4.4: Discuss alternative ways of distributing profits, such as buybacks.

Assess your understanding of key principles in corporate finance as introduced in Chapter 1. This quiz covers corporate governance, finance principles, and their relationship to an organization's objectives. Prepare to demonstrate your knowledge and enhance your study for Subject CB1.