Corporate Finance

NS e-Prep Course

Nanyang Technological University

Concepts in Finance – Questions and Answers
1. Scope of Corporate Finance
Q1. What is the “marginal benefits greater than or equal to marginal costs” decision rule, and why should financial managers constantly seek to apply it to business decisions? Answer

Q2. What are the relative advantages and disadvantages of using sophisticated management compensation packages to align the interests of managers and shareholders? Answer

2. Financial Statement and Cash Flow Analysis

Q1. Are balance sheets and income statements prepared with the same purpose in mind? How are these two statements different, and how are they related? Answer

Q2. How do depreciation and other noncash charges act as sources of cash inflow to the firm? Why does a depreciation allowance exist in the tax laws? For a profitable firm, is it better to depreciate an asset quickly or slowly for tax purposes? Explain. Answer

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