FINANCE 301 EXAM 1 QUESTIONS &
VERIFIED ANSWERS PASSED 100%
Finance - Correct Answer ✔✔ involves the management of money
-amount, time, risk
Three areas of Finance - Correct Answer ✔✔ Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance - Correct Answer ✔✔ The activities involved in managing money in a
business environment.
institutions and markets - Correct Answer ✔✔ Examines the structure of capital
markets, the role of financial institutions, the process of financial intermediation and how
money flows into the economy
investments - Correct Answer ✔✔ focuses on the valuation techniques and how to
value alternative investment opportunities that are provided primarily through financial
markets and institutions
Capital Markets - Correct Answer ✔✔ financial markets where issuers and investors
buy and sell debt and equity securities
Companies Raise capital through... - Correct Answer ✔✔ selling debt instruments
selling stocks/ equity instruments
Debt - Correct Answer ✔✔ obligation to repay borrowed money
Stock - Correct Answer ✔✔ represents ownership in the company
Effect of Technology - Correct Answer ✔✔ made cost of transactions lower
more transactions made
creation of new financial instruments
sophisticated hedging and investing practices
World's capital markets include a wide variety of organized exchanged where financial
claims are traded. Claim's include... - Correct Answer ✔✔ debt, equity, currencies,
commodities, and other financial assets.
Economic health - Correct Answer ✔✔ Gov
-level of interest rates, relative currency values, and performance of the stock markets
are a gauge of economic health
,Firms
- market value of stock is ultimate indicator of performance
International deregulation of past twenty years - Correct Answer ✔✔ opened new
sources of capital for companies throughout the world.
markets tend to function most efficiently in deregulated environments.
recent breakdowns in accounting and corporate governance at Enron, Worldcom,
adelphia, and Bernie Madoff ponzi schemes, and the crippling effect of the collapse of
the credit markets on the commercial and investment banking institutions has shown
that regulation and oversight are necessary to reduce corruption, greed, and fraud.
Downside of free flow of capital - Correct Answer ✔✔ volatility that may be associated
with it.
volatility in 2008 at unprecedented levels
-stock markets moving 3 to 5 percent per day, extremes of 10 percent.
Three Sets of Decisions - Correct Answer ✔✔ The investment decision
The Financing decision
The dividend decision
The Investment decision - Correct Answer ✔✔ how corporate managers should allocate
funds of the company to buy or build projects and investments that will be worth more
than they cost
The Financing Decision - Correct Answer ✔✔ how corporate managers should raise
money from institutional and individual investors through the sale of debt and equity
claims for the company to finance the investment projects of the firm
The Dividend Decision - Correct Answer ✔✔ the percentage of the company's profits
and cash from operations that the company should reinvest in the business and how
much should be returned to the company's shareholders in the form of dividends
Net Present Value (NPV) - Correct Answer ✔✔ is the value associated with investing in
a project or venture.
Capital Budgeting - Correct Answer ✔✔ valuation, planning, and managing of corporate
investments for a firm
Cost of Capital - Correct Answer ✔✔ the cost of raising debt and equity for the business
Capital Structure Decision - Correct Answer ✔✔ minimizing the cost of capital by using
the right mix of debt and equity
, -is an important role for the finance function of the company
Primary Markets - Correct Answer ✔✔ The original sale of securities by governments
and corporations
Direct finance - Correct Answer ✔✔ A flow of funds from savers to firms through
financial markets, such as the New York Stock Exchange.
Secondary Markets - Correct Answer ✔✔ Securities that are bought and sold after the
original sale
Liquidity - Correct Answer ✔✔ the speed and ease with which an owner of a security
can sell an investment to another investor or trade it in the securities market
Indirect finance - Correct Answer ✔✔ A flow of funds from savers to borrowers through
financial intermediaries such as banks. Intermediaries raise funds from savers to lend to
firms (and other borrowers).
Financial intermediation - Correct Answer ✔✔ The process by financial institutions of
acquiring funds and channeling them to users of funds
Secondary Securities - Correct Answer ✔✔ savings and checkings accounts, annuities,
insurance policies, pension plans, mutual funds
primary securities - Correct Answer ✔✔ stocks, bonds, loans, mortgages, and other
financial assets.
Financial Toolbox - Correct Answer ✔✔ Financial statements and ratios
Present value concepts
Model of risk and return
Spreadsheet modeling methods
Financial Statements and Ratio Analysis - Correct Answer ✔✔ Investing and financing
require projecting sales and expenses as well as fixed and working capital
requirements. Current financial position is the base from which these projections are
made. For forecasting purposes, financial ratios are commonly used to establish
relationships between key financial variables
Present Value Concept - Correct Answer ✔✔ Measurement of the time value of money.
A dollar today is worth more than a dollar tomorrow
Models of Risk and Return - Correct Answer ✔✔ Trade-off between return and risk
- a safe dollar is worth more than a risky dollar.
- an investor requires higher expected return to invest in riskier investments
VERIFIED ANSWERS PASSED 100%
Finance - Correct Answer ✔✔ involves the management of money
-amount, time, risk
Three areas of Finance - Correct Answer ✔✔ Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance - Correct Answer ✔✔ The activities involved in managing money in a
business environment.
institutions and markets - Correct Answer ✔✔ Examines the structure of capital
markets, the role of financial institutions, the process of financial intermediation and how
money flows into the economy
investments - Correct Answer ✔✔ focuses on the valuation techniques and how to
value alternative investment opportunities that are provided primarily through financial
markets and institutions
Capital Markets - Correct Answer ✔✔ financial markets where issuers and investors
buy and sell debt and equity securities
Companies Raise capital through... - Correct Answer ✔✔ selling debt instruments
selling stocks/ equity instruments
Debt - Correct Answer ✔✔ obligation to repay borrowed money
Stock - Correct Answer ✔✔ represents ownership in the company
Effect of Technology - Correct Answer ✔✔ made cost of transactions lower
more transactions made
creation of new financial instruments
sophisticated hedging and investing practices
World's capital markets include a wide variety of organized exchanged where financial
claims are traded. Claim's include... - Correct Answer ✔✔ debt, equity, currencies,
commodities, and other financial assets.
Economic health - Correct Answer ✔✔ Gov
-level of interest rates, relative currency values, and performance of the stock markets
are a gauge of economic health
,Firms
- market value of stock is ultimate indicator of performance
International deregulation of past twenty years - Correct Answer ✔✔ opened new
sources of capital for companies throughout the world.
markets tend to function most efficiently in deregulated environments.
recent breakdowns in accounting and corporate governance at Enron, Worldcom,
adelphia, and Bernie Madoff ponzi schemes, and the crippling effect of the collapse of
the credit markets on the commercial and investment banking institutions has shown
that regulation and oversight are necessary to reduce corruption, greed, and fraud.
Downside of free flow of capital - Correct Answer ✔✔ volatility that may be associated
with it.
volatility in 2008 at unprecedented levels
-stock markets moving 3 to 5 percent per day, extremes of 10 percent.
Three Sets of Decisions - Correct Answer ✔✔ The investment decision
The Financing decision
The dividend decision
The Investment decision - Correct Answer ✔✔ how corporate managers should allocate
funds of the company to buy or build projects and investments that will be worth more
than they cost
The Financing Decision - Correct Answer ✔✔ how corporate managers should raise
money from institutional and individual investors through the sale of debt and equity
claims for the company to finance the investment projects of the firm
The Dividend Decision - Correct Answer ✔✔ the percentage of the company's profits
and cash from operations that the company should reinvest in the business and how
much should be returned to the company's shareholders in the form of dividends
Net Present Value (NPV) - Correct Answer ✔✔ is the value associated with investing in
a project or venture.
Capital Budgeting - Correct Answer ✔✔ valuation, planning, and managing of corporate
investments for a firm
Cost of Capital - Correct Answer ✔✔ the cost of raising debt and equity for the business
Capital Structure Decision - Correct Answer ✔✔ minimizing the cost of capital by using
the right mix of debt and equity
, -is an important role for the finance function of the company
Primary Markets - Correct Answer ✔✔ The original sale of securities by governments
and corporations
Direct finance - Correct Answer ✔✔ A flow of funds from savers to firms through
financial markets, such as the New York Stock Exchange.
Secondary Markets - Correct Answer ✔✔ Securities that are bought and sold after the
original sale
Liquidity - Correct Answer ✔✔ the speed and ease with which an owner of a security
can sell an investment to another investor or trade it in the securities market
Indirect finance - Correct Answer ✔✔ A flow of funds from savers to borrowers through
financial intermediaries such as banks. Intermediaries raise funds from savers to lend to
firms (and other borrowers).
Financial intermediation - Correct Answer ✔✔ The process by financial institutions of
acquiring funds and channeling them to users of funds
Secondary Securities - Correct Answer ✔✔ savings and checkings accounts, annuities,
insurance policies, pension plans, mutual funds
primary securities - Correct Answer ✔✔ stocks, bonds, loans, mortgages, and other
financial assets.
Financial Toolbox - Correct Answer ✔✔ Financial statements and ratios
Present value concepts
Model of risk and return
Spreadsheet modeling methods
Financial Statements and Ratio Analysis - Correct Answer ✔✔ Investing and financing
require projecting sales and expenses as well as fixed and working capital
requirements. Current financial position is the base from which these projections are
made. For forecasting purposes, financial ratios are commonly used to establish
relationships between key financial variables
Present Value Concept - Correct Answer ✔✔ Measurement of the time value of money.
A dollar today is worth more than a dollar tomorrow
Models of Risk and Return - Correct Answer ✔✔ Trade-off between return and risk
- a safe dollar is worth more than a risky dollar.
- an investor requires higher expected return to invest in riskier investments
