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BF Exam 1 Review

BF Exam 1 Review - Exam 1 Business Finance 50 questions Ch...

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Exam 1 – Business Finance – 50 questions Ch. 1 Pg. 8 The major drawback of a sole proprietorship is that there is unlimited liability to the owner. Pg. 9 Corporation is unique because it’s a legal entity, it may sue or be sued, engage in contracts, and acquire property. A key feature of the corporation is the easy divisibility of the ownership interest by issuing shares of stock. p. 10 The Corporation is governed by the board of directors. p. 11 Because of diversified ownership interests, conflicts between managers and shareholders can arise that impact the financial decisions of the firm. Who are they trying to help? The stockholders or institutional investors. Congress decided that it needed to do something to control corrupt corporate behavior. < Sarbanes-Oxley Act < accounting practices. p. 12 Drawbacks: create risk, fails to consider timing of benefits, goal suffers from accurately measuring the key goal = profit. Primary goal of the firm: Maximizing shareholder wealth increases the long term value of the firm. p. 15 2 types of markets: - Capital markets are those markets where securities have a life of more than one year. - Money markets refer to those markets dealing in short term securities that have a life of one year or less. Securities in these markets can include commercial paper sold by corporations to finance their daily p. 16 When a corporation uses the financial markets to raise new funds, the sale of securities is said to be made in the primary market by way of a new issue. Ch. 2 p. 25 I/S: He would give: Sales, COGS, operating expense, interest and taxes. Calculate net income. Was done in homework. Sales - Cost of Goods Sold --------------------------- = Gross Profit - Operating Expenses ------------------- = Income from operations +/- Other income and/or expenses
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=income before tax - Income taxes ------------------------------------------------------------------------------------------------- -------- = net income We start with sales and deduct COGS to arrive at gross profit. > COGS – sales =gross profit.
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BF Exam 1 Review - Exam 1 Business Finance 50 questions Ch...

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