FINANCE 301 - EXAM 1 QUESTIONS &
VERIFIED ANSWERS RATED 100%
COMPLETE
Capital Markets - Correct Answer ✔✔ Financial place where issuers and investors buy
and sell debt and equity securities.
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.
Financing Decision - Correct Answer ✔✔ How corporate managers 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.
Dividend Decision - Correct Answer ✔✔ The percentage of company's profits and cash
from operations that the company should reinvest in the business and how much should
be returned to the stockholders.
Net Present Value - Correct Answer ✔✔ The value (positive or negative) associated
with investing in a project or venture.
Financial Intermediation - Correct Answer ✔✔ A financial intermediary borrows funds
from savers/investors and uses funds to make purchases higher yielding securities.
Financial Toolbox - Correct Answer ✔✔ -Financial Statements and Ratio Analysis
-Present and Future Value Concepts
-Models or risk and return
-Spreadsheet modeling methods
Market Efficiency - Correct Answer ✔✔ Current prices reflect all publicly available
information and prices react completely, correctly, and instantaneously to new
information.
Reversion to the Mean - Correct Answer ✔✔ Tendency for a particular measure of
performance, such as percentage rate of return, to revert to its historical average return.
Random Walk Hypothesis - Correct Answer ✔✔ This states that the changes in stock
prices are completely random.
Capital Asset Pricing Model - Correct Answer ✔✔ The pricing of assets and the trade-
off between the risk of the asset and the expected returns associated with the asset.
, Market Cap - Correct Answer ✔✔ (Current Stock Price) x (# of Shares Outstanding)
Capital Budgeting - Correct Answer ✔✔ Process of planning and managing a firm's
long-term investments in projects and ventures.
Goal of Capital Budgeting - Correct Answer ✔✔ Maximize the net present value of the
investments that are financed by the firm's capital budget.
Working Capital Management - Correct Answer ✔✔ Process of managing the firm's
short-term assets, such as accounts receivable and inventory, and short-term liabilities.
Insure the firm has sufficient resources to continue its operations and avoid costly
financial interruptions.
Goal of Working Capital Management - Correct Answer ✔✔ Minimize the cost of
maintaining the net working capital position of the company.
Capital Structure - Correct Answer ✔✔ Process of managing the firm's specific mixture
of long-term debt and equity that it uses to finance its operations and investments.
Goal of Capital Structure - Correct Answer ✔✔ Minimize the weighted average cost of
capital.
Future Value - Correct Answer ✔✔ PV x (1+ r)^n
Diversification - Correct Answer ✔✔ Spreading wealth among a number of different
investment classes, doing this will result in the highest amount of return given a certain
risk.
Asset Allocation - Correct Answer ✔✔ Reduce risk by diversifying your portfolio.
Modern Portfolio Theory - Correct Answer ✔✔ A theory on how risk-averse investors
can construct portfolios in order to optimize market risk for expected returns,
emphasizing that risk is an inherent part of higher reward.
Controller - Correct Answer ✔✔ Head accountant of the firm and is responsible for
maintaining the company's books and financial statements.
Treasurer - Correct Answer ✔✔ In charge of managing the company's cash, which
includes managing the firm's day-to-day cash inflows and outflows.
Sole Proprietorship - Correct Answer ✔✔ A business owned by one person.
Partnership - Correct Answer ✔✔ A business formed by two or more individuals.
VERIFIED ANSWERS RATED 100%
COMPLETE
Capital Markets - Correct Answer ✔✔ Financial place where issuers and investors buy
and sell debt and equity securities.
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.
Financing Decision - Correct Answer ✔✔ How corporate managers 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.
Dividend Decision - Correct Answer ✔✔ The percentage of company's profits and cash
from operations that the company should reinvest in the business and how much should
be returned to the stockholders.
Net Present Value - Correct Answer ✔✔ The value (positive or negative) associated
with investing in a project or venture.
Financial Intermediation - Correct Answer ✔✔ A financial intermediary borrows funds
from savers/investors and uses funds to make purchases higher yielding securities.
Financial Toolbox - Correct Answer ✔✔ -Financial Statements and Ratio Analysis
-Present and Future Value Concepts
-Models or risk and return
-Spreadsheet modeling methods
Market Efficiency - Correct Answer ✔✔ Current prices reflect all publicly available
information and prices react completely, correctly, and instantaneously to new
information.
Reversion to the Mean - Correct Answer ✔✔ Tendency for a particular measure of
performance, such as percentage rate of return, to revert to its historical average return.
Random Walk Hypothesis - Correct Answer ✔✔ This states that the changes in stock
prices are completely random.
Capital Asset Pricing Model - Correct Answer ✔✔ The pricing of assets and the trade-
off between the risk of the asset and the expected returns associated with the asset.
, Market Cap - Correct Answer ✔✔ (Current Stock Price) x (# of Shares Outstanding)
Capital Budgeting - Correct Answer ✔✔ Process of planning and managing a firm's
long-term investments in projects and ventures.
Goal of Capital Budgeting - Correct Answer ✔✔ Maximize the net present value of the
investments that are financed by the firm's capital budget.
Working Capital Management - Correct Answer ✔✔ Process of managing the firm's
short-term assets, such as accounts receivable and inventory, and short-term liabilities.
Insure the firm has sufficient resources to continue its operations and avoid costly
financial interruptions.
Goal of Working Capital Management - Correct Answer ✔✔ Minimize the cost of
maintaining the net working capital position of the company.
Capital Structure - Correct Answer ✔✔ Process of managing the firm's specific mixture
of long-term debt and equity that it uses to finance its operations and investments.
Goal of Capital Structure - Correct Answer ✔✔ Minimize the weighted average cost of
capital.
Future Value - Correct Answer ✔✔ PV x (1+ r)^n
Diversification - Correct Answer ✔✔ Spreading wealth among a number of different
investment classes, doing this will result in the highest amount of return given a certain
risk.
Asset Allocation - Correct Answer ✔✔ Reduce risk by diversifying your portfolio.
Modern Portfolio Theory - Correct Answer ✔✔ A theory on how risk-averse investors
can construct portfolios in order to optimize market risk for expected returns,
emphasizing that risk is an inherent part of higher reward.
Controller - Correct Answer ✔✔ Head accountant of the firm and is responsible for
maintaining the company's books and financial statements.
Treasurer - Correct Answer ✔✔ In charge of managing the company's cash, which
includes managing the firm's day-to-day cash inflows and outflows.
Sole Proprietorship - Correct Answer ✔✔ A business owned by one person.
Partnership - Correct Answer ✔✔ A business formed by two or more individuals.
