CFEA3230

Corporate Finance
Tutorial 1
1. Which of the following areas that Corporate Finance does NOT cover?
A) Trading
B) Capital Budgeting
C) Dividend Policy
D) Mergers and Acquisition
E) Risk Management
2. Corporate Finance covers all the following discipline EXCEPT:
A) Making investment decisions in a business organization.
B) Making decisions that increases the market share of the firm.
C) Making decisions that increases the profitability of the firm.
D) Making decisions that increases the value of the firm.
E) All above are the disciplines of Corporate Finance.
3. Which of the following is strictly NOT a role of the Chief Financial
Officer?
A) Proprietary Trading
B) Planning for investment
C) Budgeting for next years expenses
D) Acquiring a new plant
E) Preparing annual report

4. The person generally directly responsible for overseeing the tax

management, cost accounting, financial accounting, and information
system functions is the:
A) treasurer.
B) director.
C) controller.
D) chairman of the board.
E) chief executive officer.

5. The person generally directly responsible for overseeing the cash and
credit functions, financial planning, and capital expenditures is the:
A) treasurer.
B) director.
C) controller.
D) chairman of the board.
E) chief operations officer.

6. The process of planning and managing a firm's long-term investments is

called:
A) working capital management.
B) financial depreciation.
C) agency cost analysis.
D) capital budgeting.
E) capital structure.

7. The mixture of debt and equity used by a firm to finance its operations
is called:
A) working capital management.
B) financial depreciation.
C) cost analysis.
D) capital budgeting.
E) capital structure.

8. The management of a firm's short-term assets and liabilities is called:

A) working capital management.
B) debt management.
C) equity management.
D) capital budgeting.
E) capital structure.
9. Businesses can take all these forms except:
A) Sole Proprietorship
B) Partnership
C) Public Listed Company
D) Private Listed Company
E) Limited Liability Company
10. Which of the following statement is FALSE?
A) In a corporation, each share gets a voting right.
B) Corporate have perpetual life.
C) Partnership period is limited to the registration period.
D) Partnership pays taxes at corporate income tax rate.
E) In a corporation, preference share does not get a voting right.
11. The NPV:
A) shows the payback period - the point at which NPV is positive.
B) shows the internal rate of return - the point at which NPV is zero.
C) shows the NPV over a range of discount rates.
D) B and C are correct.
E) None of the above.
12. Assuming that your capital is constrained, which investment tool
should you use to determine the correct investment decisions?
A) Profitability Index
B) Incremental IRR
C) NPV
D) IRR
E) None of the above.
13. Which of the following is the most important primary goal of a
financial manager?
A) Increase the profit of the firm.
B) Reduce the firms costs.

C) Increase market share.

D) Maximise shareholders wealth.
E) Increase the value of the firm.
14. Agency problem arises when:
A) there is a disagreement amongst the board members.
B) there is a disagreement between the management and the staff.
C) there is a disagreement between the shareholders and the management.
D) there is a conflict of interest between the board of directors and the
management team.
E) None of the above.
15. Which of the following are ways to solve the agency problem?
I) Bonuses for the managers when they increase profit of the firm.
II) Bonuses for the managers when they increase shareholders equity.
III)Employee Shares Option Scheme when they increase shareholders
equity.
IV) Takeovers and mergers
V) Better risk management and control
A)
B)
C)
D)
E)

I, II, III
II, III, IV
III, IV and V
I, III, V
All of the above.

16. Which of the following is NOT one of mechanisms under which the
ownership and control of a corporation can change?
A) Sales of Shares
B) Purchase of Shares
C) Bonus Issue of Shares
D) Shares Swap
E) Employee Shares Option Scheme
17. Which of the following is NOT one of the ways of fund raising?
A) Rights Issue of Shares
B) Bonus Issue of Shares
C) Private Issue of Shares
D) Private Issue of Debts
E) All the above are ways of fund raising

18. Which of the following is not debt?

A) Hire Purchase
B) Lease
C) Debenture
D) Bond
E) Treasury Bills
19. In the event of the firms bankruptcy, which of the following gets
priority to claim against the assets of the company?
A) Directors
B) Managers
C) Common Shareholders
D) Preferred Shareholders
E) General Public
20. The primary market is responsible for:
A) the trading of shares.
B) the issuance of securities.
C) the governance of the listed companies.
D) the audit and compliance of listed companies.
E) All of the above.