FIN2603 EXA M PACK QUESTIONS AND ANSWERS 2023

FIN2603 EXA M PACK QUESTIONS AND ANSWERS 2023 capital market - ANS a market place where companies and government can raise long term funds, a market where money is lent for periods longer than 1 year cost-benefit principle - ANS sound financial decision making requires that an analysis of the total cost and the total benefits be conducted - as far as possible, the benefit should be greater than the cost of any decision Financial institution - ANS an organisation that acts as a channel between savers and borrowers of funds (Two main types of financial institutions are banks that pay interest on deposits from the interest earned on the loans, and insurance companies and mutual funds that collect funds by selling their policies or shares to the public and provide returns in the form of periodic benefits and profit payouts.) financial manager - ANS uses financial statements to make capital-budgeting decisions, capital structure decisions and working-capital decisions in order to create wealth for the organisation's shareholders Money markets - ANS the financial markets for short-term borrowing and lending; provide short-term liquidity with securities such as treasury bills, commercial paper and bankers' acceptances Profitability - ANS the firm's ability to generate revenues that will exceed total costs by using the firm's assets for productive purposes; may be achieved by marketing products or services to maintain a sufficient profit margin with the support of promotions at competitive prices directed to appropriate target markets through appropriate distribution channels Spread - ANS the difference between the rate charged and the rate paid (Financial institutions need to invest or lend out their available funds at a rate that exceeds the rate they are