Test Review 1

Question 1

What are three types of financial management decisions

Answer 1

Capital budgeting, Capital structure, Working Capital

Question 2

What is Capital budgeting?

Answer 2

what long-term investments shouldthe firm take?

Question 3

What is Capital structure

Answer 3

Where the firm will get the long-term financing (debt v equity)

Question 4

What is Working capital management?

Answer 4

How the firm should manage its everyday financial activities

Question 5

What are four disadvantages of sole proprietorship and partnerships business organization

Answer 5

Unlimited liability, limited life, difficulty in transferring ownership, difficulty raising capital funds.

Question 6

What are three benefits of Sole proprietorship and partnerships?

Answer 6

Simpler, less regulations, owners are also the managers, personal tax rates can sometimes be better then tax rate.

Question 7

Primary disadvantages of corporations

Answer 7

Double taxation to shareholders,

Question 8

Advantages of a Corporation

Answer 8

Limited liability, ease of transferability, ability to raise capital, unlimited life