Corp Fin. Ch1
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Questions and Answers

What is the primary objective of management according to the text?

  • Maximizing the firm's relative amounts of debt and equity
  • Maximizing the return required by the firm's investors
  • Increasing social welfare
  • Maximizing the company's fundamental value (correct)
  • What do financial markets do?

  • Offer advantages and disadvantages to businesses
  • Exchange cash for immediate claims on future cash
  • Connect providers of cash with users of cash (correct)
  • Guarantee uncertain future cash
  • What is free cash flow (FCF) according to the text?

  • Profit generated by a company after paying all its expenses
  • The total cash flow generated by a company in a year
  • Cash flow available for distribution to a company’s investors after sustaining ongoing operations (correct)
  • The cash flow available for distribution to a company’s creditors only
  • What is the weighted average cost of capital (WACC) determined by according to the text?

    <p>Firm’s capital structure, interest rates, firm’s risk, and market’s attitude toward risk</p> Signup and view all the answers

    What is the primary economic function of financial intermediaries?

    <p>Promoting efficient capital allocation</p> Signup and view all the answers

    In which market are securities issued and sold for the first time by a company to raise capital?

    <p>Primary market</p> Signup and view all the answers

    What is a key contrast between face-to-face auctions and automated trading platforms?

    <p>Physical gatherings vs. lack of personal interaction</p> Signup and view all the answers

    How do broker-dealer networks differ from registered stock exchanges in terms of market access?

    <p>Limited to clients of owning brokerage</p> Signup and view all the answers

    What is a firm’s intrinsic value based on?

    <p>Earnings, growth, and risk</p> Signup and view all the answers

    How might a firm’s intrinsic value differ from its actual market value?

    <p>Influence of market sentiment and speculation</p> Signup and view all the answers

    What impact will the technology investment have on Edmund Corporation's earnings per share this year?

    <p>No impact</p> Signup and view all the answers

    How can companies raise capital through equity financing?

    <p>Issuing shares of stock</p> Signup and view all the answers

    What is the primary goal of a corporation?

    <p>To maximize the wealth of the company's shareholders</p> Signup and view all the answers

    Which market includes instruments like Treasury bills and certificates of deposit?

    <p>Money Market</p> Signup and view all the answers

    What is the role of an investment bank?

    <p>Assists companies in raising capital by underwriting securities</p> Signup and view all the answers

    What does a foreign trade deficit imply?

    <p>A country's imports exceed its exports</p> Signup and view all the answers

    Which stock market is primarily electronic with no physical trading floor?

    <p>NASDAQ</p> Signup and view all the answers

    Which stock market is associated with technology and diverse businesses?

    <p>NASDAQ</p> Signup and view all the answers

    Which stock market uses a dealer market structure with competing market makers?

    <p>NASDAQ</p> Signup and view all the answers

    Which stock market is perceived as more lenient in its listing requirements, attracting diverse companies?

    <p>NASDAQ</p> Signup and view all the answers

    Which stock market may use maker-taker pricing with rebates and fees for trading?

    <p>NASDAQ</p> Signup and view all the answers

    What is the primary function of investment banks in the transfer of capital?

    <p>Acting as intermediaries between borrowers and savers</p> Signup and view all the answers

    Which type of market refers to the buying and selling of assets for 'on-the-spot' delivery?

    <p>Money markets</p> Signup and view all the answers

    What is the main purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act?

    <p>To prevent financial crises like the Great Recession of 2007</p> Signup and view all the answers

    What is the distinguishing feature of a Limited Liability Partnership (LLP)?

    <p>Providing flexibility in management and taxation</p> Signup and view all the answers

    Which stock market has a hybrid system with floor-based and electronic trading?

    <p>NYSE</p> Signup and view all the answers

    What is the primary trading mechanism of the NASDAQ Stock Market?

    <p>Primarily electronic with no physical trading floor</p> Signup and view all the answers

    Which stock market is associated with technology and diverse businesses?

    <p>NASDAQ</p> Signup and view all the answers

    In which stock market do multiple market makers compete for trades?

    <p>NASDAQ</p> Signup and view all the answers

    Which stock market has stricter listing requirements, often for larger, established companies?

    <p>NYSE</p> Signup and view all the answers

    What is the primary difference in the market structure between the NYSE and the NASDAQ?

    <p>Auction-style vs. dealer market structure</p> Signup and view all the answers

    What kind of fee structure does the NASDAQ Stock Market use?

    <p>'Maker-taker' pricing with rebates and fees</p> Signup and view all the answers

    Where do DMMs facilitate trading for specific stocks?

    <p>NYSE</p> Signup and view all the answers

    Which stock market operates primarily during regular trading hours?

    <p>Both NYSE and NASDAQ</p> Signup and view all the answers

    Which stock market utilizes electronic trading to varying extents?

    <p>'Both NYSE and NASDAQ'</p> Signup and view all the answers

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