1. FIN 419 Final Exam
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1. A financial analyst is responsible for maintaining and controlling the firm's daily
cash balances. Frequently manages the firm's short-term investments and
coordinates short-term borrowing and banking relationships.
2. In partnerships, owners have unlimited liability and may have to cover debts of
other less financially sound partners.
3. In partnerships, a partner can readily transfer his/her wealth to other partners.
4. The board of directors is responsible for managing day-to-day operations and
carrying out the policies established by the chief executive officer.
5. The president or chief executive officer is elected by the firm's stockholders and
has ultimate authority to guide corporate affairs and make general policy.
6. In limited liability partnerships, the liability protection does not protect partners
from their own individual acts of malpractice.
7. In limited liability partnership, all partners have limited liability with regard to the
business, they are not personally liable for other partners' malpractice, and the
limited liability partnership is taxed as partnership.
8. Managerial finance
9. Finance can be defined as
10. The true owner(s) of the corporation is (are) the _____C___.
11. High cash flow is generally associated with a higher share price whereas higher
risk tends to result in a lower share price.
12. Managing the firm's assets includes all of the following EXCEPT
13. Managing the firm's liabilities includes all of the following EXCEPT
14. High earnings per share (EPS) does not necessarily translate into a high stock
price.
15. The agency problem occurs when the firm selects an ineffective marketing
advertising and PR firm to represent them.

2. 16. The major purpose of the Sarbanes-Oxley Act of 2002 was to place caps on the
compensation that could be paid to corporate executives.
17. Corporate owner's receive realizable return through
18. As the risk of a stock investment increases, investors'
19. The Sarbanes-Oxley Act of 2002 was passed in response to
20. The Sarbanes-Oxley Act of 2002 did all of the following EXCEPT
21. A public offering is the sale of a new security issue, typically debt or preferred
stock, directly to an investor or group of investors.
22. A competitive market that allocates funds to their most productive use is called
a(n)
23. A downward-sloping yield curve indicates generally cheaper short-term
borrowing costs than long-term borrowing costs. True
24. If a bond pays $1,000 plus interest at maturity, $1,000 is called the
25. High-quality (high-rated) bonds provide lower returns than lower-quality (low-
rated) bonds.
26. Holders of equity have claims on both income and assets that are secondary to
the claims of creditors.
27. The tax deductibility of interest lowers the cost of debt financing, thereby
causing the cost of debt financing to be lower than the cost of equity financing.
28. Preferred stock has characteristics of debt since it provides a fixed periodic cash
payment.
29. The number of outstanding shares of common stock is always greater than or
equal to the number of authorized shares of common stock.
30. The free cash flow valuation model can be used to determine the value of an
entire company as the present value of its expected free cash flows discounted at
the firm's weighted average cost of capital.
31. A common stockholder has no guarantee of receiving any cash inflows, but
receives what is left after all other claims on the firm's income and assets have been
satisfied.

3. 32. Treasury stock generally does not have voting rights, does not earn dividends,
and does not have a claim on assets in liquidation.
33. Firms occasionally repurchase stock in order to alter capital structure or to
increase the returns to the owners.
34. A prospectus is another term for a firm's annual report showing the firm's
prospects for the coming year.
35. The opportunity for management to purchase a certain number of shares of
their firm's common stock at a specified price over a certain period of time is a
warrant.
36. Shares of stock currently owned by the firm's shareholders are called
37. According to Table 7.1, Ford's common stock must have closed at ________ per
share on the previous trading day.
38. According to Table 7.1, the expected dividend per share for Ford is
39. Based on Table 7.1, Ford's earnings per share are
40. In an efficient market, the expected return and the required return are equal.
41. In an efficient market, stock prices adjust quickly to new public information.
42. The constant growth model is an approach to dividend valuation that assumes
that dividends grow at a constant rate indefinitely.
43. A firm purchased goods on January 27 with a purchase price of $1,000 and credit
terms of 2/10 net 30 EOM. The firm paid for these goods on February 9. The firm
must pay _1,000____ for the goods.
44. Future value is the value of a future amount at the present time, found by
applying compound interest over a specified period of time.
45. The future value interest factor is the future value of $1 per period compounded
at i percent for n periods.
46. Everything else being equal, the higher the discount rate, the higher the present
value.
47. The future value of $200 received today and deposited at 8 percent for three
years is

4. 48. An ordinary annuity is an annuity in which cash flows occurs at the beginning of
each period.
49. The present value of a $25,000 perpetuity at a 14 percent discount rate is
50. Calculate the present value of $5,800 received at the end of year 1, $6,400
received at the end of year 2, and $8,700 at the end of year 3, assuming an
opportunity cost of 13 percent.
PV =
FIN 419 Final Exam
PLEASE DOWNLOAD THE ANSWERS HERE!!!