BUS 2000 Takada Exam 2: Characteristics of Good Money System
29 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What must be paid whenever specified in debt financing?

  • Interest (correct)
  • Dividends
  • Principal
  • Maturity date
  • Which type of financing involves an investment that never has to be repaid?

  • Debenture
  • Secured
  • Common
  • Preferred (correct)
  • What is a legal obligation for companies who issue secured bonds?

  • Pay interest (correct)
  • Interest is tax deductible
  • Increase debt
  • Must pay dividends
  • Which special bond feature allows the issuer to repay the bond before maturity?

    <p>Callable (D)</p> Signup and view all the answers

    What type of securities does an investment banker assist in selling or issuing?

    <p>New securities (A)</p> Signup and view all the answers

    What are the characteristics of a good money system?

    <p>Portability, durability, divisibility, uniqueness, stability (D)</p> Signup and view all the answers

    Which components make up the total M1 money supply?

    <p>Currency + demand deposits (B)</p> Signup and view all the answers

    What does the Federal Reserve focus on to monitor potential inflation?

    <p>Total M2 money supply (B)</p> Signup and view all the answers

    Who was the immediate past Chairman of the Federal Reserve before Jerome Powell?

    <p>Janet Yellen (B)</p> Signup and view all the answers

    Which institution is responsible for determining how to control the economy?

    <p>Federal Reserve (B)</p> Signup and view all the answers

    Where is the largest regional bank of the Federal Reserve located?

    <p>New York Federal Reserve (B)</p> Signup and view all the answers

    Why does the Federal Reserve increase the federal funds rate and shrink its portfolio of bonds and other assets?

    <p>To fight against inflation (D)</p> Signup and view all the answers

    What is the purpose of selling government bonds in relation to monetary policy?

    <p>To decrease money supply (B)</p> Signup and view all the answers

    Which sector includes commercial banks and savings and loans associations in the American banking system?

    <p>Life insurance companies (A)</p> Signup and view all the answers

    What was the main focus of the Dodd-Frank Wall Street Reform and Consumer Protection Act?

    <p>Preventing another banking collapse like in 2009 (A)</p> Signup and view all the answers

    Why did the Federal Reserve decide to increase the discount rate and set credit controls?

    <p>To reduce money supply (D)</p> Signup and view all the answers

    Where is the internationally money fund located?

    <p>Washington DC (B)</p> Signup and view all the answers

    What activity ratios are impacted positively by implementing a just-in-time strategy?

    <p>Efficiency ratios (B)</p> Signup and view all the answers

    In financial benchmarking analysis, what type of comparison involves benchmarking against a specific firm's data at a particular point in time?

    <p>Horizontal analysis (A)</p> Signup and view all the answers

    Which skill is NOT listed as one of the most important skills needed by CFOs?

    <p>Problem-solving (D)</p> Signup and view all the answers

    What is one of the typical activities that financial managers engage in as part of their role?

    <p>Managing taxes (A)</p> Signup and view all the answers

    Which type of budget is focused on managing daily operations and acquiring inventory?

    <p>Operating budget (B)</p> Signup and view all the answers

    What is one of the reasons firms might need long-term funds?

    <p>Temporary promotional program (D)</p> Signup and view all the answers

    What is the main role of venture capitalists?

    <p>Finance new and rapidly growing companies (C)</p> Signup and view all the answers

    What does leverage refer to in the context of finance?

    <p>Raising funds through borrowing to increase the firm's rate of return (C)</p> Signup and view all the answers

    How do venture capitalists add value to the companies they invest in?

    <p>Through active participation and assistance in developing new products or services (B)</p> Signup and view all the answers

    What does the debt to owner's equity ratio measure?

    <p>The degree to which a firm relies on borrowed funds in its operation (B)</p> Signup and view all the answers

    Which source of equity financing involves selling ownership stakes to external investors?

    <p>Public sale of stock (A)</p> Signup and view all the answers

    What is the primary purpose of leveraging in finance?

    <p>Increasing the firm's rate of return through borrowing (A)</p> Signup and view all the answers

    Study Notes

    Economy and Money

    • Economy depends on money as a medium of exchange, unit of value, and store of value
    • Money supply consists of currency and demand deposits (M1) and time deposits and money market accounts (M2)

    Debt vs Equity Financing

    • Debt financing:
      • Secured or debenture bonds
      • Must be repaid on maturity date
      • Interest must be paid whenever specified
    • Equity financing:
      • Preferred or common stocks
      • Investment never has to be repaid
      • No legal obligation to pay dividends

    Investment Banker

    • Assists in the sale/issue of new securities
    • Underwrites issues
    • Sells to institutional investors

    Bond Market

    • Characteristics:
      • Coupon/interest rate
      • Denomination (e.g., $1,000)
      • Principal
      • Maturity date
    • Types:
      • Unsecured/debenture bonds
      • Secured bonds
    • Advantages:
      • Increase debt
      • Interest is tax deductible
      • Legal obligation to pay interest
    • Disadvantages:
      • Temporary source of funds
      • Repaid on maturity date
      • Can be repaid before maturity with call provision

    Stock

    • Definition: a type of security that represents ownership in a company

    Federal Reserve

    • Responsibilities:
      • Regulates and controls the money supply
      • Supervises and regulates banks
      • Collects data on economic activities
      • Processes checks
    • Tools:
      • Reserve requirement
      • Discount rate
      • Open market operations
    • Current chairman: Jerome Powell

    Monetary Policy

    • Objectives:
      • Fight against inflation
      • Regulate money supply
    • Tools:
      • Increase/decrease reserve requirement
      • Increase/decrease discount rate
      • Sell/buy government bonds
      • Set credit controls

    American Banking System

    • Components:
      • Depository institutions (commercial banks, savings and loans, credit unions)
      • Non-depository institutions (life insurance companies, pension funds, brokerage firms)

    International Banking

    • International monetary fund (IMF) located in Washington, D.C.
    • Stock market performance: 20% fluctuation during COVID-19 pandemic

    Financial Management

    • Importance of finance:
      • Financial management is crucial for business decisions
      • Financial managers must possess skills such as people development, building relationships, communication, creativity, objectivity, leadership, and analytical thinking
    • Functions:
      • Planning, budgeting, obtaining funds, controlling funds, collecting funds, auditing, and advising top management
    • Financial planning:
      • Budget process
      • Financial statements
      • Types of budgets (capital, cash, operating)
      • Financial controls and feedback

    Financial Ratios and Analysis

    • Leverage ratio:
      • Measures the degree to which a firm relies on borrowed funds
      • Debt to owners' equity ratio
    • Activity ratios:
      • Inventory turnover
      • Just-in-time strategy
    • Financial benchmarking analysis:
      • Horizontal analysis (cross-section comparison)
      • Vertical analysis (time-series comparison)

    Sources of Funds

    • Short-term funds:
      • Meet monthly expenses
      • Unanticipated emergencies
      • Cash-flow problems
    • Long-term funds:
      • New product development
      • Replacing capital expenditures
      • M&A (mergers and acquisitions)
      • Expanding current inventory
      • Temporary promotional programs
      • Expansion into new markets
      • Building new facilities

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    This quiz covers topics related to the characteristics of a good money system, including portability, durability, divisibility, uniqueness, and stability. It also discusses the components of the money supply such as M1 and M2, and how inflation can be influenced by the size of the money supply.

    More Like This

    BUS 347 Midterm Flashcards
    14 questions
    Bus 107 Exam 1 Flashcards
    80 questions
    BUS 201 Quiz 9: Art 9 and Bankruptcy
    8 questions
    BUS 1101 Final Flashcards - Baylor University
    19 questions
    Use Quizgecko on...
    Browser
    Browser