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Questions and Answers
Capital budgeting primarily involves managing a firm's short-term assets and liabilities.
Capital budgeting primarily involves managing a firm's short-term assets and liabilities.
False
The financial manager is typically involved in day-to-day decision-making for the corporation.
The financial manager is typically involved in day-to-day decision-making for the corporation.
False
The treasurer's office is responsible for managing the firm's cash and credit.
The treasurer's office is responsible for managing the firm's cash and credit.
True
Corporate finance focuses solely on short-term financing solutions.
Corporate finance focuses solely on short-term financing solutions.
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Financial institutions are primarily concerned with managing operational aspects of corporations.
Financial institutions are primarily concerned with managing operational aspects of corporations.
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One of the main questions in corporate finance is where to find long-term financing for investments.
One of the main questions in corporate finance is where to find long-term financing for investments.
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Evaluating the size, timing, and risk of future cash flows is fundamental to capital structure decisions.
Evaluating the size, timing, and risk of future cash flows is fundamental to capital structure decisions.
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The controller's office is primarily responsible for managing a firm's capital expenditures.
The controller's office is primarily responsible for managing a firm's capital expenditures.
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Evaluating investment opportunities involves determining what types of buildings, machinery, and equipment will be necessary.
Evaluating investment opportunities involves determining what types of buildings, machinery, and equipment will be necessary.
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Investments primarily concern financial liabilities like loans and debts.
Investments primarily concern financial liabilities like loans and debts.
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Study Notes
Financial Management Decisions
- Financial managers must consider three basic questions: capital budgeting, capital structure, and working capital management.
Capital Budgeting
- Capital budgeting involves planning and managing long-term investments.
- Key aspects include evaluating the size, timing, and risk of future cash flows.
Capital Structure
- Capital structure refers to the mix of debt and equity a firm uses.
- Decisions involve determining the optimal mix of debt and equity to minimize the cost of funds.
Working Capital Management
- Working capital management involves managing short-term assets and liabilities.
- Decisions include finding the least expensive sources of funds for the firm.
The Financial Manager
- Owners of large corporations often aren't directly involved in day-to-day decisions.
- Corporations employ managers to handle these decisions on their behalf.
- A top officer, like a vice president of finance or chief financial officer (CFO), is typically responsible for financial management.
- The treasurer manages cash and credit, financial planning, and capital expenditures.
- The controller manages cost and financial accounting, tax payments, and management information systems.
Corporate Finance
- Corporate finance is the study of ways to answer these three fundamental questions:
- What long-term investments should be made?
- How should the investments be financed?
- How to manage everyday financial activities (e.g. collecting from customers, paying suppliers).
Finance: A Quick Look
- Financial topics are categorized into five main areas:
- Corporate finance (focus of this textbook)
- Investments (dealing with financial assets, like stocks and bonds)
- Career paths (financial advisor, portfolio manager, analyst)
- Financial institutions (banks, insurance companies)
- International finance (involves international aspects of corporate finance, investments, or financial institutions)
- Fintech (combination of technology and finance)
Chapter Outline
- Finance: A Quick Look
- Corporate Finance and the Financial Manager
- Forms of Business Organization
- The Goal of Financial Management
- The Agency Problem and Control of the Corporation
- Financial Markets and the Corporation
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Description
This quiz covers the key aspects of financial management, including capital budgeting, capital structure, and working capital management. Explore how financial managers tackle these critical decisions to optimize a firm's financial performance. Test your knowledge on the role of financial managers in corporations.
