Questions and Answers
What subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own?
Investments
Financial management involves decisions about which of the following?
What subarea of finance is important for adapting to the global economy?
International Finance
Who is the firm's highest-level financial manager?
Signup and view all the answers
What type of business organization is relatively easy to start and is subject to lighter regulatory burdens?
Signup and view all the answers
What is generally known as double taxation?
Signup and view all the answers
How can maximizing the value of owner's equity be stated for corporations?
Signup and view all the answers
Which of these are NOT basic approaches to minimizing the agency problem?
Signup and view all the answers
Who helps firms access capital markets and advises managers about interaction with those markets?
Signup and view all the answers
The portion of a company's profits that are kept by the company rather than distributed as cash dividends is referred to as _______________.
Signup and view all the answers
All of the following are functions of the board of directors except ________.
Signup and view all the answers
Which statement is incorrect regarding shareholder responsibilities?
Signup and view all the answers
From a taxation perspective, the form of business organization with the highest business-level taxes is the __________.
Signup and view all the answers
What do we call the process of earning interest on both the original deposit and earlier interest payments?
Signup and view all the answers
What is the process called when determining how much a future amount is worth today?
Signup and view all the answers
What is the Rule of 72 used for?
Signup and view all the answers
A dollar paid in the future is worth as much as a dollar paid today.
Signup and view all the answers
When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point.
Signup and view all the answers
What are level sets of frequent, consistent cash flows called?
Signup and view all the answers
What factor, alongside the length of time of the annuity, is important in accumulating wealth within an annuity?
Signup and view all the answers
The present value of annuity payments made far into the future is worth a lot today.
Signup and view all the answers
What type of financial institutions arrange most primary market transactions for businesses in the U.S.?
Signup and view all the answers
What do we refer to first-time stock issues from firms that allow their equity shares to be publicly traded on the stock market?
Signup and view all the answers
Once firms issue financial instruments in primary markets, these stocks and bonds are then traded in which of these?
Signup and view all the answers
What type of markets feature debt securities or instruments with maturities of one year or less?
Signup and view all the answers
Which of the following is NOT a money market instrument?
Signup and view all the answers
Which of the following is NOT a capital market instrument?
Signup and view all the answers
Study Notes
Investments
- Involves methods for deciding which securities to own and which firms' securities to purchase.
- Emphasizes how investors prefer to be repaid.
Financial Management
- Encompasses decisions on project funding, minimizing taxation, and determining capital structure.
International Finance
- Crucial for adapting to the dynamics of the global economy.
Chief Financial Officer
- Represents the highest-level financial manager in a firm.
Sole Proprietorship
- A business structure that is easy to establish with minimal regulatory burden compared to other forms.
Double Taxation
- Occurs when corporate income is taxed at both corporate and shareholder levels upon dividend distribution.
Owner's Equity
- Maximizing value equates to maximizing the company’s stock price.
Agency Problem Minimization
- Effective strategies include monitoring management actions and aligning personal interests of managers with owners but ignoring the conflict is not a viable solution.
Investment Bankers
- Assist firms in accessing capital markets and provide advisory services regarding market interactions.
Retained Earnings
- Refers to profits that are reinvested in the company rather than distributed as dividends.
Board of Directors
- Responsible for various functions; however, reporting to auditors is not one of their roles.
Shareholder Bankruptcy Responsibility
- Incorrectly stated that shareholders must pay off corporate bonds in bankruptcy situations.
Business Organization Taxation
- Corporations face the highest level of business taxes from a taxation perspective.
Compounding
- Describes the process of earning interest on both the initial deposit and previously earned interest.
Discounting
- The calculation method used to determine the present worth of a future sum.
Rule of 72
- A mathematical approximation used to estimate the time needed to double an investment.
Future Value
- Represents the total worth of contributions made over time when saving for future expenses.
Annuities
- Defined as level streams of cash flows that occur at regular intervals.
Wealth Accumulation Factors
- The duration of the annuity and the interest rate for compounding are critical for wealth accumulation.
Present Value of Annuities
- Payments scheduled for the far future have very low present value.
Primary Market Transactions
- Investment banks in the U.S. primarily facilitate these transactions for businesses.
Initial Public Offerings
- Refers to first-time stock issues that allow companies to publicly trade equity shares.
Secondary Markets
- In these markets, stocks and bonds already issued in primary markets are traded.
Money Markets
- Comprising debt securities or instruments that mature in one year or less.
Capital Market Instruments
- Notably excludes corporate bonds as money market instruments.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Prepare for your finance exam with these flashcards covering essential concepts such as investments and financial management decisions. Each card provides a key term along with its definition to help reinforce your understanding. Ideal for students looking to solidify their knowledge in finance.
