Corp Fin. Ch1

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

Maximizing the company's fundamental value

What do financial markets do?

Connect providers of cash with users of cash

What is free cash flow (FCF) according to the text?

Cash flow available for distribution to a company’s investors after sustaining ongoing operations

What is the weighted average cost of capital (WACC) determined by according to the text?

Firm’s capital structure, interest rates, firm’s risk, and market’s attitude toward risk

What is the primary economic function of financial intermediaries?

Promoting efficient capital allocation

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

Primary market

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

Physical gatherings vs. lack of personal interaction

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

Limited to clients of owning brokerage

What is a firm’s intrinsic value based on?

Earnings, growth, and risk

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

Influence of market sentiment and speculation

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

No impact

How can companies raise capital through equity financing?

Issuing shares of stock

What is the primary goal of a corporation?

To maximize the wealth of the company's shareholders

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

Money Market

What is the role of an investment bank?

Assists companies in raising capital by underwriting securities

What does a foreign trade deficit imply?

A country's imports exceed its exports

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

NASDAQ

Which stock market is associated with technology and diverse businesses?

NASDAQ

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

NASDAQ

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

NASDAQ

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

NASDAQ

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

Acting as intermediaries between borrowers and savers

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

Money markets

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

To prevent financial crises like the Great Recession of 2007

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

Providing flexibility in management and taxation

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

NYSE

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

Primarily electronic with no physical trading floor

Which stock market is associated with technology and diverse businesses?

NASDAQ

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

NASDAQ

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

NYSE

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

Auction-style vs. dealer market structure

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

'Maker-taker' pricing with rebates and fees

Where do DMMs facilitate trading for specific stocks?

NYSE

Which stock market operates primarily during regular trading hours?

Both NYSE and NASDAQ

Which stock market utilizes electronic trading to varying extents?

'Both NYSE and NASDAQ'

Test your knowledge on corporation shareholders' protection from business debts, firm's intrinsic value, and the factors causing a difference between intrinsic and market value.

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