Podcast
Questions and Answers
Which area of finance focuses on the valuation of stocks and bonds?
Which area of finance focuses on the valuation of stocks and bonds?
- International Finance
- Investments (correct)
- Corporate Finance
- Financial Institutions
What is the primary focus of corporate finance?
What is the primary focus of corporate finance?
- Decisions about what long-term investments to make. (correct)
- Decisions related to financial assets such as stocks and bonds.
- Managing international currency exchange rates
- Understanding the role of banks and insurance companies.
Which of the following questions falls under the umbrella of corporate finance?
Which of the following questions falls under the umbrella of corporate finance?
- What is the impact of interest rate changes on bond prices?
- How can an individual maximize returns from stock investments?
- How can a company minimize its tax liabilities?
- What mix of debt and equity should a company use to fund its operations? (correct)
Which role within a corporation is primarily responsible for managing the company's cash and credit?
Which role within a corporation is primarily responsible for managing the company's cash and credit?
Which of the following best describes capital budgeting decisions?
Which of the following best describes capital budgeting decisions?
What is the primary goal of financial management for a for-profit business?
What is the primary goal of financial management for a for-profit business?
Which of the following is an example of a goal focused on controlling risk?
Which of the following is an example of a goal focused on controlling risk?
How does a primary market transaction differ from a secondary market transaction?
How does a primary market transaction differ from a secondary market transaction?
Your firm has just issued new stock. This transaction would occur in the:
Your firm has just issued new stock. This transaction would occur in the:
If an investor sells shares of stock on the NYSE, this transaction occurs in the:
If an investor sells shares of stock on the NYSE, this transaction occurs in the:
Which of the following is the best description of working capital management?
Which of the following is the best description of working capital management?
Which office handles cost and financial accounting, tax payments, and management information systems?
Which office handles cost and financial accounting, tax payments, and management information systems?
What is the essence of capital budgeting?
What is the essence of capital budgeting?
What is the role of financial institutions?
What is the role of financial institutions?
Which of the following is typically the representation of the owners' interests in a corporation?
Which of the following is typically the representation of the owners' interests in a corporation?
Corporations seek long-term financing to pay for investments. What are the two options mentioned for this financing?
Corporations seek long-term financing to pay for investments. What are the two options mentioned for this financing?
Which of the following is NOT a responsibility of the treasurer's office?
Which of the following is NOT a responsibility of the treasurer's office?
What transactions occur in the secondary market?
What transactions occur in the secondary market?
A company has a goal to achieve a 20% increase in sales revenue next year. What class does this goal fall into?
A company has a goal to achieve a 20% increase in sales revenue next year. What class does this goal fall into?
Which one would be considered Fintech?
Which one would be considered Fintech?
Flashcards
Corporate finance
Corporate finance
The area of finance that focuses on how companies manage their money and make financial decisions.
Capital budgeting
Capital budgeting
Managing a firm's long-term investments and deciding which projects to invest in.
Capital structure
Capital structure
Managing a firm's debt and equity to find the optimal mix of funding.
Working capital management
Working capital management
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Goal of financial management
Goal of financial management
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Financial market
Financial market
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Primary market
Primary market
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Public offerings
Public offerings
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Private placements
Private placements
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Secondary market
Secondary market
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Vice president of finance
Vice president of finance
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Controller's office
Controller's office
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Treasurer's office
Treasurer's office
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Study Notes
- Financial topics are grouped into five main areas.
- Corporate finance is the focus.
- Investments deals with financial assets like stocks and bonds.
- Career paths include financial advisor, portfolio manager, and security analyst.
- Financial institutions are businesses that deal primarily in financial matters such as banks and insurance companies.
- International finance includes the international aspects of corporate finance, investments, or financial institutions.
- Fintech combines of technology and finance.
Corporate Finance
- Broadly, corporate finance looks at answering three questions.
- What long-term investments should you take on involving business lines, buildings, machinery, and equipment?
- Where will you get long-term financing, involving bringing in other owners or borrowing money?
- How will you manage everyday financial activities, such as collecting from customers and paying suppliers?
The Financial Manager
- Owners or stockholders, of large corporations usually are not involved in making business decisions day-to-day.
- Corporations employ managers to represent the owners’ interests and make decisions on their behalf.
- Financial management is associated with a top officer like a vice president of finance of a CFO.
- A Vice president of finance coordinates the activities of the treasurer and the controller.
- A controller’s office handles cost and financial accounting, tax payments, and management information systems.
- A treasurer’s office manages firm cash, credit, financial planning, and capital expenditures.
Financial Management Decisions
- The financial manager deals with three basic types of questions.
- Capital budgeting is the process of planning and managing a firm’s long-term investments.
- Evaluating the size, timing, and risk, of future cash flows is the essence of capital budgeting.
- Capital structure is the mixture of debt and equity maintained by a firm.
- They evaluate how much the firm should borrow or the best mixture of debt and equity.
- They evaluate what the least expensive sources of funds are for the firm.
- Working capital management refers to a firm’s short-term assets and liabilities.
Financial Management Goals
- In a for-profit business, a goal of financial management is to make money or add value for the owners.
- Financial goals fall into two classes; Profitability and Controlling Risk.
- Profitability goals relate to earning or increasing profits through sales, market share, and cost control.
- Controlling risk can be seen through bankruptcy avoidance, stability, and safety.
- The goal of financial management is to maximize the current value per share of the existing stock.
Financial Markets
- A financial market brings buyers and sellers together to buy/sell debt and equity securities.
- The most important differences between financial markets concern the types of securities traded, how trading is conducted, and who the buyers and sellers are.
- In a primary market transaction, the corporation is the seller raising money for the corporation.
- Public offerings involve selling securities to the general public.
- Private placements are negotiated sales involving a specific buyer.
- A secondary market transaction involves one owner/creditor selling to another.
- This serves as a means for transferring ownership of corporate securities.
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