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Chapter 1 assignment: Answer the following questions in full sentences.

1. What is finance? Explain how this field affects all the activities in which businesses engage? 2. What is risk? Why must risk as well as return be considered by the financial manager who is evaluating a decision alternative or action? 3. What are the major differences between accounting and finance with respect to emphasis on cash flows and decision making? 4. Define Agency problems and describe how they give rise to agency costs? 5. Which legal form of business organization is most common? Which form is dominant in terms of business revenues?

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