Introduction to Corporate Finance

What are the three main questions that Corporate Finance addresses?

1. What long-term investments should the firm choose? 2. How should the firm raise funds for the selected investments? 3. How should short-term assets be managed and financed? (correct)
1. What long-term and short-term investments should the firm choose? 2. How should the firm raise funds for the selected investments? 3. How should the firm's assets be managed and financed?
1. What long-term investments should the firm choose? 2. How should the firm raise funds for the selected investments? 3. How should long-term and short-term assets be managed and financed?
1. What short-term assets should the firm choose? 2. How should the firm raise funds for the selected investments? 3. How should long-term assets be managed and financed?

Prior to the iPad's launch, what did the financial experts at Apple do?

Estimated the cost of producing the iPad, calculated the unit volume that the company would have to achieve to earn a satisfactory rate of return, and developed a plan to manage the risks that Apple would confront when making transactions in foreign currencies.
Calculated the unit volume that the company would have to achieve to earn a satisfactory rate of return, developed a plan to manage the risks that Apple would confront when making transactions in foreign currencies, and evaluated the potential market for the iPad.
Evaluated the potential market for the iPad, estimated the cost of producing it, and developed a plan to manage the risks that Apple would confront when making transactions in foreign currencies. (correct)
Evaluated the potential market for the iPad, calculated the unit volume that the company would have to achieve to earn a satisfactory rate of return, and estimated the cost of producing it.

What is the main goal of corporate finance?

To generate wealth for the firm's employees.
To generate wealth for the firm's managers.
To generate wealth for the firm's customers.
To generate wealth for the firm's shareholders. (correct)

What is the balance sheet model of the firm?

Current Assets, Tangible Fixed Assets, Intangible Fixed Assets, Shareholders' Equity, Current Liabilities, Long-Term Debt (D) Signup and view all the answers

What are the career opportunities in corporate finance?

All of the above (D) Signup and view all the answers

According to the passage, how does the capital structure decision affect the value of the firm?

The capital structure decision affects both the size and slicing of the pie, which is the value of the firm. (B) Signup and view all the answers

What is the primary goal of the financial manager according to the passage?

To maximize shareholder wealth as measured by the market price of the firm's stock. (A) Signup and view all the answers

According to the passage, what does the market price of the firm's stock reflect?

The timing, magnitude, and risk of the cash flows that investors expect the firm to generate over time. (D) Signup and view all the answers

What is the main reason why a financial manager should not try to maximize profit according to the passage?

Profit does not consider risk. (B) Signup and view all the answers

According to the passage, what are the two main responsibilities of the financial manager?

Selecting value creating projects and making smart financing decisions. (D) Signup and view all the answers

What is the relationship between the capital structure decision and the value of the firm according to the passage?

The capital structure decision affects both the size and slicing of the pie, which is the value of the firm. (C) Signup and view all the answers

What should a financial manager try to maximize?

Shareholder wealth (B) Signup and view all the answers

Which of the following is NOT a stakeholder group that firms seek to preserve the interests of, according to the text?

Suppliers (D) Signup and view all the answers

What is the relationship between the firm and the financial markets, according to the diagram in the text?

The firm generates cash flows that must exceed the cash flows it receives from the financial markets (A) Signup and view all the answers

What is the main advantage of the corporate form of business over other forms of business organization?

It allows the firm to raise large amounts of cash (B) Signup and view all the answers

What is the main goal of the agency relationship between stockholders and managers, according to the text?

To maximize shareholder wealth (A) Signup and view all the answers

Introduction to Corporate Finance

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