Financial capital correct answers Money - used for purchase of real capital
Real capital correct answers Long term plant and equipment
Capital structure theory correct answers Study of the relative importance of debt and equity
Inflation correct answers Increasing prices - a key variable i...
IET 414 || Already Graded A+.
Financial capital correct answers Money - used for purchase of real capital
Real capital correct answers Long term plant and equipment
Capital structure theory correct answers Study of the relative importance of debt and equity
Inflation correct answers Increasing prices - a key variable in financial decisions
Slowing down of price increases.
Effects = significant to financial managers and have become more important in decision making
regarding financial forecasting, required rates of return for capital budgeting decisions, and cost
of capital.
Credit default swaps (CDS) correct answers Unregulated products = created as insurance against
borrowers defaulting on their loans
Dodd - Frank Act correct answers Passed by Congress to promote financial stability by
improving accountability and transparency in the overall financial system, protecting taxpayers
by improving the stability of large, diversified financial institutions, and protecting consumers
from abusive practices in the financial service industry. First major financial regulatory change
in US since great depressions.
Sole proprietorship correct answers Form of organization represents single-person ownership and
offers the advantages of simplicity of decision making and low organizational and operating
costs. Most small businesses with 1-10 employees are sole proprietorship
Partnership correct answers Two or more major owners. This enables them to raise more capital
and to share ownership responsibilities.
Articles of partnership correct answers Specify ownership interest, the methods for distributing
profits, and means for withdrawing from the partnership
Limited liability partnership correct answers Special form of partnership that circumvents this
shared unlimited liability feature. One or more partners are designated general partners and have
unlimited liability for the debts of the firm; other partners are designated limited partners and are
liable only for their initial contribution.
Agency Theory correct answers Issues of corporate governance - Examines the relationship
between the owners and the managers of the firm
Institutional investors correct answers Pension funds and mutual funds own a large percentage of
stock in major US companies, these investors have more to say about the way publicly owned
corporations are managed
, Sarbanes-Oxley Act correct answers Set up a five-member Public Company Accounting
Oversight Board with responsibility for establishing auditing standards within companies,
controlling the quality of audits, and setting rules and standards for the independence of the
auditors
Shareholder wealth maximization correct answers Not a simple task because the financial
manager cannot directly control the firm's stock price but can only act in a way that is consistent
with the desires of shareholder
Insider trading correct answers Occurs when someone uses information that is not available to
the public to profit from trading in a company's publicity traded securities
Financial markets correct answers The meeting place for people, corporations, and institutions
that either need money or have money to lend or invest
Public financial markets correct answers National, state, and local govs that are primarily
borrowers of funds for highways, education,welfare, and other public activities; their markets are
referred to as this
Corporate financial markets correct answers Corporations such as Ford or Nike raise funds in
this
Money markets correct answers markets dealing with short- term securities have a life of more
than one year
Primary market correct answers When a corp uses financial markets to raise new funds, called an
initial public offering (IPO), the sales of securities are sold to the public
Secondary market correct answers After securities are sold to the public (institutions and
individuals) they are traded on the secondary market where prices are cont changing as investors
buy and sell securities based on their expectations of a corporations' prospects
Restructuring correct answers Can result in changes in the capital structure (liabilities and equity
on the balance sheet).Result in the selling of low-profit-margin divisions with the proceeds of the
sale reinvested in better investment opportunities
Earnings per share correct answers Should be interpreted as earns per share
Price-earnings ratio correct answers Multiplier applied to earnings per share to determine current
value of the common stock
Liquidity correct answers Convertibility to cash (asset accounts are listed
Current assets correct answers cash and other assets expected to be exchanged for cash or
consumed within a year
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