Ch 1,2

Corporate Finance

Questions and Exercises

1. What are the three types of financial management decisions and what questions are
they designed to answer?
2. What are the three major forms of business organization?
3. What is the goal of financial management?
4. What are agency problems and why do they exist within a corporation?
5. What is the difference between a primary market and a secondary market?
6. What is the difference between book value and market value? Which should we use for
decision-making purposes?
7. What is the difference between accounting income and cash flow? Which do we need to
use when making decisions?
8. What is the difference between average and marginal tax rates? Which should we use
when making financial decisions?
9. Use the following statements to find CFFA 2010:
Balance sheet
Income Statement