WorksheetsChapter 1 Overview of Corporate Finance
Total questions: 10
Worksheet time: 9mins
The ultimate goal of corporate financial management is:
Maximizing the accounting profit of a corporation
Minimizing the operating costs of a corporation
Maximizing market share of a corporation
Maximizing the value of the stock
Which type of business entity does not have legal personality?
Sole proprietorship
Partnership
Joint-stock company
Limited liability company
Agency costs in a corporation arise due to:
Conflicts of interest between owners and corporate agents
The separation of ownership and management in the company
Asymmetric information between owners and corporate agents
All of the above are correct.
How to minimize agency costs in a joint-stock company?
A. Sign a short-term contract for manager
B. Having a reasonable compensation policy for CEOs.
C. Enhancing monitoring and supervision
B and C
How does a company’s balance sheet change if it borrows from a bank to purchase fixed assets?
Total assets decrease, total liabilities decrease
Total assets increase, total liabilities decrease
Total assets increase, total liabilities increase
Total assets decrease, total liabilities increase
Which of the following is a long-term financing source for a corporation?
A. Equity
B. Accounts payable
C. Bonds
A and C
Earnings per share (EPS) is calculated as:
Profits allocated for dividends / Total outstanding shares
Net profit after tax/ Total outstanding shares
Net income attributable to common shareholders / Total outstanding shares
Net profit after tax / Total company shares
Dividend per share (DPS) is constrained by the following condition:
DPS is always equal to EPS
DPS > 0
0 ≤ DPS ≤ EPS
0 ≤ EPS ≤ DPS
The tax shield from interest expense is determined as:
Interest expense – corporate income tax
Interest expense × corporate income tax rate
Interest expense × (1 – corporate income tax rate)
Interest expense × corporate income tax
A company has a fixed asset with an initial cost of 600 million VND and a straight-line depreciation period of 10 years. If the corporate income tax rate is 20%, what is the annual tax shield from depreciation?
12 million VND
10 million VND
120 million VND
60 million VND
