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Questions and Answers
What is essential for cash invested in assets according to corporate finance principles?
What is essential for cash invested in assets according to corporate finance principles?
Which of the following is NOT a pillar of corporate finance?
Which of the following is NOT a pillar of corporate finance?
Which aspect of a firm's operations does working capital management primarily focus on?
Which aspect of a firm's operations does working capital management primarily focus on?
What primary decision is the financial manager responsible for when it comes to financing?
What primary decision is the financial manager responsible for when it comes to financing?
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What should be considered when identifying investment opportunities for a firm?
What should be considered when identifying investment opportunities for a firm?
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In terms of financing, which option is typically viewed as a less expensive source of funds?
In terms of financing, which option is typically viewed as a less expensive source of funds?
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Which considerations are important for liquidity management?
Which considerations are important for liquidity management?
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What is a key advantage that tech companies have in comparison to traditional businesses?
What is a key advantage that tech companies have in comparison to traditional businesses?
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Which company is ranked highest as the most valuable brand according to the provided information?
Which company is ranked highest as the most valuable brand according to the provided information?
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When starting a firm, what is crucial to acquire to ensure value creation?
When starting a firm, what is crucial to acquire to ensure value creation?
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Which of the following best describes the commonality among tech companies listed as top brands?
Which of the following best describes the commonality among tech companies listed as top brands?
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In corporate finance, which of the following is considered a primary goal of financial management?
In corporate finance, which of the following is considered a primary goal of financial management?
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How do traditional companies typically expand as compared to tech companies?
How do traditional companies typically expand as compared to tech companies?
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What is one challenge that financial managers face within corporate finance?
What is one challenge that financial managers face within corporate finance?
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Which financial area is primarily concerned with how companies generate funds and allocate resources?
Which financial area is primarily concerned with how companies generate funds and allocate resources?
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What aspect of company growth is often capital intensive, in contrast to tech companies?
What aspect of company growth is often capital intensive, in contrast to tech companies?
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What is the main tax implication for partnerships compared to corporations?
What is the main tax implication for partnerships compared to corporations?
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What characterizes the life of a corporation compared to a partnership?
What characterizes the life of a corporation compared to a partnership?
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What is a critical requirement for forming a corporation that is not necessary for a sole proprietorship?
What is a critical requirement for forming a corporation that is not necessary for a sole proprietorship?
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Who has the ultimate control in a corporation with a unitary board structure?
Who has the ultimate control in a corporation with a unitary board structure?
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What happens to a partnership when a partner dies?
What happens to a partnership when a partner dies?
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What is the role of the supervisory board in a two-tier board structure?
What is the role of the supervisory board in a two-tier board structure?
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In terms of liability, how do corporations differ from sole proprietorships?
In terms of liability, how do corporations differ from sole proprietorships?
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Which of the following statements is true regarding the taxation of profits?
Which of the following statements is true regarding the taxation of profits?
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What does the term 'unitary board of directors' imply?
What does the term 'unitary board of directors' imply?
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How does corporate governance differ between a partnership and a corporation?
How does corporate governance differ between a partnership and a corporation?
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Study Notes
### Corporate Finance and the Financial Manager
- Financial Management has three pillars: Investment, Financing, and Liquidity.
- Investment involves identifying opportunities that yield more value for the company than they cost.
- The financial manager is responsible for making investment decisions, which are the core of corporate finance.
- Financing refers to obtaining the necessary funds to fund investments.
- Liquidity management involves effectively managing a firm's current assets and liabilities.
- The financial manager is responsible for determining the optimal mix of long-term debt and equity financing.
- The financial manager decides on the best sources of funding for the company.
- The financial manager is responsible for deciding how much inventory and cash to keep on hand.
- The financial manager decides on the terms for selling goods on credit, including the credit terms offered to customers.
Forms of Business Organization
- Sole Proprietorship: One individual owns and manages the entire business, with profits taxed as personal income; easy to establish, but with unlimited liability and limited funding potential.
- Partnership: Requires an agreement between partners, features limited and unlimited partners, ceases when a partner leaves or dies; profits taxed as personal income, with difficulty in raising capital.
- Corporation: Requires Articles of Incorporation and a Memorandum of Association, with limited liability for shareholders and a separate legal entity; taxed at the corporate tax rate, with potential for easier fund-raising.
- Corporations have a board of directors who report to shareholders.
- The board of directors can be setup in two ways: unitary and two-tier
- Unitary Board of Directors: Reports to the shareholders and consists of executive and non-executive directors
- Two-Tier Board of Directors: Reports to a supervisory board, which consists of representatives from banks, the government, trade unions and other stakeholders.
Capital Budgeting
- Capital budgeting identifies investment opportunities that bring more value than their cost.
- Capital structure comprises the long-term debt and equity that a company uses to finance its operations.
Working Capital Management
- Working capital management refers to managing a firm's short-term assets and liabilities, involving decisions like extending credit to customers, determining inventory levels.
- The financial manager decides on the terms for selling goods on credit, including the credit terms offered to customers.
- The financial manager also determines the optimal levels of inventory and cash to maintain.
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Description
This quiz covers the foundations of corporate finance, focusing on the roles and responsibilities of financial managers. Explore key concepts such as investment decisions, financing strategies, and liquidity management essential for ensuring a company's financial health.
