The final stage in the interview process for an assistant financial analyst at Caledonia Products involves a

Question:

The final stage in the interview process for an assistant financial analyst at Caledonia Products involves a test of your understanding of basic financial concepts. You are given the following memorandum and asked to respond to the questions. Whether you are offered a position at Caledonia will depend on the accuracy of your response. To: Applicants for the position of Financial Analyst From: Mr. V. Morrison, CEO, Caledonia Products Re: A test of your understanding of basic financial concepts and of the corporate tax code Please respond to the following questions:
1- What is the appropriate goal for the firm and why?
2- What does the risk-return trade-off mean?
3- Why are we interested in cash flows rather than accounting profits in determining the value of an asset?
4- What is an efficient market, and what are the implications of efficient markets for us?
5- What is the cause of the agency problem, and how do we try to solve it?
6- What do ethics and ethical behavior have to do with finance?
7- Define
Sole proprietorship,

Corporation
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...