Module 1: Introduction to Corporate Finance

What is the primary goal of corporate finance?

• Minimise company expenses

• Maximise shareholder value

• Increase employee benefits

• Reduce tax liabilities

What is the main focus of investment and capital budgeting?

• Deciding how much dividend to distribute

• Allocating resources to projects with the highest return

• Reducing the company’s debt

• Selling company shares to raise capital

What is one disadvantage of equity financing?

• Company must repay the loan with interest

• Dilutes ownership stakes of existing shareholders

• Increases the company’s debt

• It is only available to large corporations

What is a key benefit of debt financing?

• No need to repay the capital

• Retains full ownership of the company

• No interest payments required

• No impact on future profits

What is a convertible bond in hybrid financing?

• A bond that pays dividends to shareholders

• A debt security that can be converted into shares of stock

• A loan that never needs to be repaid

• An equity share with fixed interest payments

What type of financing helps companies acquire assets through periodic payments without immediate ownership?

• Leasing

• Debt financing

• Equity financing

• Trade finance

Which type of financing uses the sale of outstanding invoices to provide liquidity to a company?

• Invoice finance

• Debt financing

• Leasing

• Trade finance

Which of the following is a characteristic of hire purchase agreements?

• Full ownership is transferred at the start

• Payments are tax-deductible and ownership transfers after all payments are made

• No interest is charged on the payments

• Company is not responsible for asset maintenance

What does trade finance aim to reduce for international trade transactions?

• Production costs

• Currency exchange rates

• Risks such as credit and political risks

• Equipment maintenance costs

In a venture capital agreement, what does the investor typically expect in return for their investment?

• Repayment of the principal with interest

• A significant equity stake and high returns

• A fixed dividend on their investment

• Immediate control over company operations