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Questions and Answers
What is the primary function of the executive board?
What is the primary function of the executive board?
- To manage the day-to-day operations and report to the supervisory board (correct)
- To issue new securities in the primary market
- To monitor the performance of the supervisory board
- To facilitate the exchange of financial claims in the money market
What is the main difference between a primary market and a secondary market?
What is the main difference between a primary market and a secondary market?
- The primary market is for buying and selling existing shares, while the secondary market is for issuing new securities
- The primary market is for domestic companies, while the secondary market is for international corporations
- The primary market is for issuing new securities, while the secondary market is for buying and selling existing shares (correct)
- The primary market is for investors, while the secondary market is for companies
What is the role of financial markets in facilitating the exchange of financial claims?
What is the role of financial markets in facilitating the exchange of financial claims?
- To provide information to investors
- To monitor the performance of the executive board
- To issue new securities in the primary market
- To allow investors to buy and sell financial claims (correct)
What is the purpose of a secondary market?
What is the purpose of a secondary market?
What is the advantage of investment in the primary market?
What is the advantage of investment in the primary market?
What is the role of financial intermediaries in the financial markets?
What is the role of financial intermediaries in the financial markets?
What is the main purpose of the supervisory board?
What is the main purpose of the supervisory board?
What is the primary objective of theoretical research in finance?
What is the primary objective of theoretical research in finance?
What is a major disadvantage of an unincorporated business structure?
What is a major disadvantage of an unincorporated business structure?
What is the relation between finance and other disciplines?
What is the relation between finance and other disciplines?
What is the primary focus of empirical research in finance?
What is the primary focus of empirical research in finance?
What is a characteristic of unincorporated business structures?
What is a characteristic of unincorporated business structures?
What is the primary goal of finance research?
What is the primary goal of finance research?
What is an advantage of an unincorporated business structure?
What is an advantage of an unincorporated business structure?
What type of finance do commercial and investment banks provide to corporations?
What type of finance do commercial and investment banks provide to corporations?
What is the primary function of the London Stock Exchange (LSE) in the corporate sector?
What is the primary function of the London Stock Exchange (LSE) in the corporate sector?
What was the main problem with the pre-Big Bang era in the London Stock Exchange?
What was the main problem with the pre-Big Bang era in the London Stock Exchange?
What is the term for the initial sale of shares to the public by a company?
What is the term for the initial sale of shares to the public by a company?
What is the term for the market where new securities are issued to raise capital?
What is the term for the market where new securities are issued to raise capital?
What is the term for the market where existing securities are traded?
What is the term for the market where existing securities are traded?
What was the major change introduced in the London Stock Exchange on 27 October 1986?
What was the major change introduced in the London Stock Exchange on 27 October 1986?
What is the primary role of financial intermediaries in the financial market?
What is the primary role of financial intermediaries in the financial market?
Which of the following is NOT a function of financial intermediaries?
Which of the following is NOT a function of financial intermediaries?
What is the primary difference between primary and secondary markets?
What is the primary difference between primary and secondary markets?
What is the primary function of the London Stock Exchange?
What is the primary function of the London Stock Exchange?
What is the role of financial markets in the economy?
What is the role of financial markets in the economy?
What is the primary characteristic of financial intermediaries in the financial market?
What is the primary characteristic of financial intermediaries in the financial market?
What is the relationship between financial markets and financial intermediaries?
What is the relationship between financial markets and financial intermediaries?
What is the primary source of financing for companies limited by shares?
What is the primary source of financing for companies limited by shares?
What is a characteristic of companies limited by shares?
What is a characteristic of companies limited by shares?
What is an advantage of companies limited by shares?
What is an advantage of companies limited by shares?
Who elects the Board of Directors in single-tier board countries?
Who elects the Board of Directors in single-tier board countries?
What is a disadvantage of companies limited by shares?
What is a disadvantage of companies limited by shares?
How many boards are there in two-tier board countries?
How many boards are there in two-tier board countries?
What is a characteristic of partnerships in the UK?
What is a characteristic of partnerships in the UK?
What is a characteristic of companies limited by shares in terms of life?
What is a characteristic of companies limited by shares in terms of life?
What is a source of financing for companies limited by shares?
What is a source of financing for companies limited by shares?
Who are the residual owners of a company limited by shares?
Who are the residual owners of a company limited by shares?
Study Notes
Executive Board and Supervisory Board
- The executive board manages the day-to-day operations of a company.
- The supervisory board monitors the executive board's performance.
Business Structures
- Incorporated firms have different names in various countries, such as joint stock companies, public limited companies, and limited liability companies.
- Table 2.1 (page 20) of the course textbook provides information on the different types of names used in international corporations.
Financial Markets and Intermediaries
- Financial markets allow investors to buy and sell financial claims (securities) and facilitate this exchange.
- Stock markets have two types of markets:
- Primary market, where companies raise new equity finance by issuing new securities.
- Secondary market, where investors buy and sell existing shares.
Theories in Finance
- Theoretical research develops models and theories to explain financial phenomena or to value securities (future cash flows).
- Theories aim to explain:
- Relative prices of different securities.
- Share price movements.
- Companies' dividend decisions.
- How to value real investments.
- How to value share options and other securities.
Forms of Business Structure
- Unincorporated business structures:
- Advantages: cheap and easy to establish, ownership and control concentrated, no requirement to publish accounts.
- Disadvantages: difficult to sell, finite life, business owner has unlimited liability, difficult to raise funds to grow.
- Incorporated business structures:
- Advantages: ownership can be transferred by selling shares, infinite life, business is legally separate from its owners, limited liability, funds can be raised publicly through equity and debt markets.
- Disadvantages: difficult and expensive to establish, tax disadvantages, management is separate from owners, requirement to publish accounts.
Business Structures in Other Countries
- Most countries have similar structures relating to unincorporated and incorporated companies, though the rules and regulations may differ.
- The definition of 'partnership' varies across Europe.
- Directors of incorporated firms in Europe are elected in two main ways:
- In single-tier board countries (UK, Ireland, Sweden), shareholders elect the board of directors who then select the managers.
- In two-tier board countries (Denmark, Germany, the Netherlands), there are two boards.
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Description
Test your knowledge of finance and investments, including debt finance, equity finance, and marketability. This quiz covers topics such as intermediaries, commercial banks, and the London Stock Exchange.
