Corporate finance is a relatively independent sphere of the financial system, encompassing a wide range of monetary relations associated with the formation and use of capital, income, and money funds in the circulation of funds of organizations and expressed in the form of various cash flows. In order to be successful in this discipline, you need to know answers to all corporate finance test questions.
Corporate Finance Questions and Answers
- What is corporate finance? Corporate finance is a synthetic scientific discipline based on the achievements of such scientific and academic disciplines as economic theory, accounting and auditing, economic analysis, etc. The study of corporate finance allows us to more thoroughly master the methodology for adopting optimal financial decisions in various areas of entrepreneurship.
- What are the types of incomes? All incomes of subjects of economic relations in the process of reproduction are divided into primary and secondary types, obtained after the redistribution of primary incomes. Incomes are formed:
- By organizations in the form of profits remaining at their disposal, and depreciation charges (net cash flow).
- By employees in the form of remuneration, which remains after payment of taxes and mandatory payments.
- By states in the form of redistributed income of enterprises to the budget and extra-budgetary funds.
- By households in the form of net remuneration of labor, payments from net profit to shareholders and participants, payments to “budget employees,” and payments from non-budgetary social funds.
- What is the financial aspect of distribution at the organizational level? Revenue from the sale of goods, services (sales proceeds), excluding VAT and excises, minus variables and fixed costs included in the cost of sales, represents the profit from sales of products which is the main element of gross profit. Subtracting commercial and administrative expenses from it, they receive profit from sales. After it is adjusted for other income and expenses, profit before tax is formed. Having paid a profit tax from it, we get a net profit.
- What does the state regulate when creating and distributing the value of GDP within a particular organization? When creating and distributing the value of GDP within a particular organization, the state today regulates the:
- Composition of deductions that reduce the taxable base.
- Amount of some tax deductions for calculating taxable profits (travel, representation, advertising costs, and interest expenses on borrowed funds).
- Rates of deductions to social funds.
- Methods of applying depreciation charges for fixed assets, intangible assets, as well as the useful lives of depreciable fixed assets and intangible assets with a view to calculating taxable profits.
- Objects and rates of taxation.
- Terms and procedures for writing off the liabilities of the organization from the balance.
- Composition of non-operating expenses that are taken into account for taxable profits.
- What regulates a significant part of the financial relations of organizations? A significant part of the financial relations of organizations is regulated by civil legislation: the size and procedure for the formation of authorized and reserve capital for organizations of various organizational and legal forms, the procedure for the placement and redemption of shares, the procedure for liquidation and merger of organizations, the order of priority of writing off funds from the current account, and bankruptcy procedure.
It should be noted that certain money incomes and funds are formed in the organization already at the stage of creation and distribution of GDP (conditionally, with reference to the organization). Thus, part of the proceeds from the sale of products should be directed to reimbursement of material costs and labor costs, but already at the expense of the revenue received, and the organization accumulates funds in the form of depreciation charges on fixed assets and intangible assets. Depreciation charges are intended for the acquisition of new fixed assets, but before they are acquired they are in the turnover of the organization. In addition, due to the proceeds from the sale of products, other funds are formed – reserves of forthcoming expenses and payments, the composition of which is regulated by the relevant regulatory documents in the field of accounting and the accounting policy of the organization. The organization can also form a repair fund designed to evenly write off the costs for particularly complex types of repair of fixed production assets to the cost of production. The amount of the above funds is included in the cost of production, and the formation of these funds is in the process of distributing sales proceeds.
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