Overview of Finance

Which of the following is NOT a good example of a financial decision?

• Conducting feasibility study of a business plan

• Finding source of financing with the lowest cost

• Buying rubber at a price agreed today but to be delivered in the future

• Selecting suppliers with the highest reliability

The objective of the firm is to maximize...

• sales

• reputation

• profit

• shareholder value

Which of the following statements is FALSE?

• For business with a lot of profit, the corporate income tax rate is typically higher than personal income tax rate.

• Limited liability means shareholders are not required to pay debt on behalf of the business.

• Owners of businesses that are set up as juristic persons are subjected to double taxation.

• Businesses that are operated as sole proprietors pay taxes as individual persons.

Which of the following example would be an example of primary market transaction? (You may want to Google some of these names!)

• SoftBank investing $1.25 billion in Uber

• Amazon acquiring Whole Foods Market for $13.7 billion

• LHSC buying the leasehold right of Terminal 21 Shopping Center

• Temasek Holdings selling 21% of Intouch Holdings (INTUCH) to Singtel

Which of the following is NOT a "pain point" in the financial system?

• Matching cost

• Acquisition cost

• Agreement cost

• Monitoring cost

Which of the following is NOT an example of a financial institution?

• Commercial banks

• Savings cooperatives

• Insurance companies

• Securities brokers

Which of the following statements is FALSE?

• Price is what you pay. Value is what you get.

• Prices we see in stock market are specified by the most influential person in the market.

• In "buy low, sell high", buy low means buying when price < value.

• To estimate the value of a stock, we need to make guesses about its future performance.