Name and Surname ............................................

SDF 1.
1. Read the following passage, fit each of the following terms into the most appropriate space: (1) financing,
(2)real, (3)bonds, (4)investment, (5) equipments, (6) financial, (7) capital budgeting, (8) brand names.
“Companies usually buy ............... assets. These include both tangible assets such as ................. and intangible
assets such as .................. To pay for these assets, they sell ................. assets such as ................. The decision
about which assets to buy is usually termed the ................... or .................... decision. The decision about how to
raise the money is usually termed the ...................decision.”

2. Agency costs are costs incurred when:

a. Managers do not attempt to maximize firm value
b. Shareholders incur costs to monitor the managers and influence their actions
c. Both A and B
d. None of the above
3. The treasurer usually oversees the following functions of a corporation except:
a. Preparation of financial statements
b. Investor relationships
c. Cash management
d. Obtaining finances
4. A firm's investment decision is also called the:
a. Financing decision
b. Capital budgeting decision
c. Liquidity decision
d. None of the above
5. A business owned by a solitary individual who has unlimited liability for its debt is called a:
a. Corporation.
b. Sole proprietorship.
c. General partnership.
d. Limited partnership.
e. Limited liability company.
6. The controller of a corporation generally reports directly to the:
a. Board of directors.
b. Chairman of the board.
c. Chief executive officer.
d. President.
e. Vice president of finance.
7. What is the primary goal of financial management?
a. Increased earnings
b. Maximizing cash flow
c. Maximizing shareholder wealth
d. Minimizing risk of the firm
8. Which form of business structure is most associated with agency problems?
a. Sole proprietorship.
b. General partnership.
c. Limited partnership.
d. Corporation.
e. Limited liability company.

1. Pasco Co. borrowed $20,000 at a rate of 14% annual simple interest, with interest paid at the end of each
month. How much interest would Pasco have to pay in a month?

2. Assume that 2 year from now you plan to deposit $2,000 in a savings account that pays a nominal rate of
10%. If the bank compounds interest semiannually, how much will you have in your account 5 years from
now?

3. Your parents will retire in 20 years. They currently have $150,000, and they think they will need $400,000
at retirement. What annual interest rate must they earn to reach their goal, assuming they don’t save any
additional funds?

4. The interest charged on a 4-years loan at 12% annual simple interest rate is $340,000 at the end of the period.
Calculate the amount of loan you have borrowed from the bank.