FIN Exam Bundle (Graded A+)

QN=1 (20283) Which of the following does maximizing shareholder wealth not usually account for? a. Risk. b. Government regulation. c. The timing of cash flows. d. Amount of cash flows. - Answers-B QN=2 (20262) Financial markets in which equity and debt instruments with maturities greater tha...

A personal cash flow statement measures all of the following except: A. Net worth B. Cash inflows C. Cash outflows D. A personal cash flow statement measures all of the above - Answers-A. Net Worth Jill receives $1,000 in salary and a $100 dividend from investments each month. Jill also pays ...

Wealth - Answers-the economic value of the assets someone possess Stakeholder - Answers-anyone other than an owner (shareholder) with a claim on the cash flows of a company, including employees, suppliers, creditors, and the government Productive assets - Answers-the tangible and intangible as...

Finance - Answers-It deals with obtaining the right amount of money from the right sources at the right time, where "right" is determined by how the amounts, sources, and times affect the value of the individual or organization. Corporation - Answers-This state-created entity is authorized to c...

1. The process of managing a firm's long-term investments is called: A. capital budgeting. B. working capital management. C. credit management. D. cost accounting. E. capital structure management. - Answers-A Short-term assets and short-term liabilities are referred to as the firm's: ...

Classify each of the following in terms of their effect on interest rates: 1. Covenants on borrowing become more restrictive 2. Fed increases money supply 3. Total household wealth increases - Answers-1,2,3 decreases an investor wants to buy 4% more goods and services in the future in order to...

Short-term finance - Answers-Is concerned with managing net working capital Which one of the following is a capital budgeting decision? - Answers-Deciding whether or not to open a new store Capital structure refers to the - Answers-Decisions related to long-term debt and equity financing Wh...

Foreign Exchange Dealers - Answers-are banks and a few non-bank institutions that "make a market" in foreign exchange. They buy and sell foreign exchange in the wholesale market and resell or rebuy it from customers at a slight change from the wholesale price Foreign Exchange Brokers (not deale...

how do you reduce risk - Answers-diversification what are ways to hedge risk? - Answers-Insurance forwards/futures options option prices swaps Risk - Answers-the possibility of loss or injury What is different about the finance view of risk? - Answers-its more than loss/injury it is ...

Explain when to use & how to convert between percentages & basis points including typical rounding conventions in the asset management industry. - Answers-· Basis points (bps) = 1/100 of 1% or 100 bps = 1% · Use bps for small values less than 1% think about what's quicker & more efficient · NE...

if given the FV, a higher discount rate - Answers-leads to a lower PV B/S shows assets and liabilities at any - Answers-one stated point in time capital budgeting decisions are - Answers-decisions on investing in long term products, facilities, equipment, cap budget example - Answers-creati...

What are two reasons why it is difficult for individuals to lend directly to each other - Answers--need to monitor loan receipts -loans are illiquid what are two ways in which intermediaries reduce the work and risk of individuals lending directly to each other - Answers--economies of scale with...

residual dividend policy - Answers-a policy that states that dividends will vary based upon how much excess funds the firm has from year to year Beta represents - Answers-how much change in the market affects stock price Ratios related to solvency - Answers-Quick ratio and debt ratio Ratio ...

a primary advantage for a depository institution of belonging to the federal reserve system is - Answers-direct access to the discount window of the fed national charted commercial banks are most likely to be regulated by - Answers-the FDIC, the fed reserve system and the comptroller of the curre...

FX exposure - Answers-measure of potential for a firms profitability & CF to change due to exchange rate // how cash is impacted 3 kinds of FX exposure - Answers-transaction, operation, translation operating exposure - Answers-the change in PV of a firm resulting in any change in CF caused by ...

What is finance? - Answers-What long-term investments should you take on? Where will you get the financing? How will you manage financial activities? capital budgeting/ investment decision - Answers-the process of planning and managing a firm's long-term investments; What productive activities...

The four basic financial statements contained in the annual report - Answers-balance sheet, income statement , stockholders equity , statement of cash flows 3 aspects of cash flows that affect investment value - Answers-Financial asset derived from the amount of cash flows (bigger is better) Ti...

Prime rate - Answers-The basic interest rate on short-term loans that the largest commercial banks charge to their most creditworthy corporate customers. Bellwether rate - Answers-Interest rate that serves as a leader or as a leading indicator of future trends, e.g. inflation. Federal funds ra...

Three areas of finance: - Answers-1. *Financial Management* -buying/selling of assets -financing choices -control costs 2. *Investments* -purchasing and holding assets & securities -stocks and bonds 3. *Financial Markets* -capital markets -money markets -financial intermediaries (ba...

interest bearing assets - Answers-pay interest and depend on interest rates they all begin life as a type of loan, so they are debt obligations of some issuer Types of interest bearing assets - Answers-money market instruments fixed income securities money market instrument - Answers-they a...

The firm's capital structure refers to: - Answers-D. the mix of debt and equity used to finance the firm's assets The proposition that the cost of equity is a positive linear function of capital structure is called: - Answers-C. MM Proposition II The Modigliani-Miller Proposition without tax...

What are the 3 concerns of the financial manager? - Answers-capital budgeting, capital structure, net working capital What is capital budgeting? - Answers-long term investments that you should take on, The process of planning and managing a firm's long-term investments (fixed assets): property, ...

Budgets provide a structure that recognize financial goals and organizes spending to meet those goals. - Answers-true Preparing a budget begins with defining income only. - Answers-false Cash Flow refers to when and how much money is received in your bank. - Answers-false Electricity, Water...

5. 1. and 2. only Begin with a clear picture of where you are Break down goals into manageable chunks - Answers-Financial planning considers which of the following for long-term goals? 1. Begin with a clear picture of where you are 2. Finding a great investment that promises to big retur...

maximize shareholder wealth - Answers-which of the following is the most important goal that a corporation should strive for incremental profits determine value - Answers-The five basic principles of finance include all of the following EXCEPT open above $20 because the positive news will resu...

While many people do not think in terms of money when they consider their goals in life, financial goals are helpful for everyone because they can help them achieve life goals. True False - Answers-True You are a millionaire when you have: $1 million in saving A $1 million home A net wort...

Dow Jones Industrial Average - Answers-29,982.62 S&P 500 - Answers-3,714.24 NASDAQ - Answers-13,070.70 US$ per Euro - Answers-1.21 Yen per US$ - Answers-104.68 Gold per Ounce - Answers-1,845.90 US Oil Price Per Barrel - Answers-52.14 US 10-yr interest rate - Answers-1.071% P/...

A personal cash flow statement measures all of the following except: A. Net worth B. Cash inflows C. Cash outflows D. A personal cash flow statement measures all of the above - Answers-A. Net Worth Jill receives $1,000 in salary and a $100 dividend from investments each month. Jill also pays ...

The main goal of a corporation's financial management - Answers-Maximization of shareholder wealth There are five principles that form the foundation of finance. What is the first principles? - Answers-Cash flow is what matter Principle #2 is the time value of money. It means - Answers-A doll...

Margin refers to the percentage of the value of the security you must deposit, the remainder of the cost is a loan of money from the broker. - Answers-true Stock A's expected return is 15% and the s.d. 8%. Stock B's expected return is 10% and the s.d. 5%. The trivial portfolio consisting enti...

Abnormal Return - Answers-A term used to describe the returns generated by a given security or portfolio over a period of time that is different from the expected rate of return.Actual Return on an Investment-Normal Return Fundamental Analysis - Answers-The evaluation of the economic and financia...

The timing option that gives the option to wait I. May be of minimal value if the project relates to a rapidly changing technology. II. Is partially dependent upon the discount rate applied to the project being evaluated. III. Is defined as the situation where operations are shut down for a per...

income statement - Answers-the financial statement summarizing a firm's performance over a period of time statement of cash flows - Answers-the financial statement that summarizes the sources and uses of cash over a specific period of time depreciation - Answers-a noncash expense that is reco...

The return that lenders require on a firm's borrowed funds is called the firm's ____________ (chapter 12) A. Yield to maturity B. Aftertax yield C. Bond rating D. Cost of debt E. Beta - Answers-D. Cost of debt __________________ is the return that investors require on their investments i...

What is a Credit Default Swap (CDS)? - Answers-an insurance policy on the default risk of a bond or loan. The seller of a CDS collects an annual premium (and sometime an upfront fee) from the swap buyer. The buyer of the swap collects nothing unless the bond issuer or loan borrower defaults, in whic...

Gross Pay - Answers-Amount earned before taxes Credit - Answers-Granting of a loan and creation of debt Personal Finance - Answers-An individual or family decision based upon their ability to earn, budget, save, spend, and give. Debt - Answers-money owed to another person or company Asse...

capital budgeting - Answers-process of planning and managing a firm's long-term investments capital structure - Answers-mixture of debt and equity maintained by a firm working capital - Answers-a firm's short-term assets and liabilities sole proprietorship - Answers-a business owned by a ...

root fin or finit - Answers-end or limit final - Answers-"end" of something or the last one definition - Answers-word's meaning confine - Answers-"limited" to an area or space or keep withing certain limits finally - Answers-"at the end" finish - Answers-to "end" a project or...

Infinite - Answers-limitless or endless in space, extent, or size; impossible to measure or calculate Infinity - Answers-the state or quality of being infinite Definite - Answers-clearly stated or decided Finite - Answers-having limits or bounds Refined - Answers-elegant and cultured in ...

Steps in the managerial decision making process - Answers-1. identify the problem and assign responsibility 2. determine and evaluate possible courses of action 3. make a decision 4. review results of the decision Incramental Analysis - Answers-The process of identifying the financial data t...

Why is savings and investing important? - Answers-its is important for people of all income levels What is inflation? - Answers-An overall increase in price In order to meet long term financial goals, what is your best option for planning - Answers-Mutual funds What is default risk? - Answe...

the capital budgeting methods learned in this course can be used to analyze proposed changes to the firm's: a. physical assets b. accounting methods c. both a and b - Answers-c. both a and b what is the effect on a firm's cost of equity (rs) if the Fed tightens credit, assuming other thin...

cost of equity - Answers-the return that equity investors require on their investment in the firm Re - Answers-because Re is the return that shareholders require on the stock, it can be interpreted as the firm's cost of equity capital estimating g - Answers-1. use historical growth rates 2. ...

Blue Chip - Answers-Large and stable corporations Cyclical Stock - Answers-Follows the business cycle of advances and declines in the economy Micro Cap Stock - Answers-Capitalization between $50 and $300 million or less Midcap Stock - Answers-Capitalization between $2 billion and $10 billio...

Bond - Answers-a long term debt instrument Treasury bonds - Answers-bonds issued by the federal government, sometimes reffered to as government bonds Corporate bonds - Answers-bonds issued by corporations municipal bonds - Answers-bonds issued by state and local governments foreign bonds...

Present value - Answers-earlier money on a time line Future value - Answers-later money on a time line Interest rate - Answers-exchange rate b/w earlier money & later money (discount rate, cost of capital, opportunity cost of capital, or required return) Discount rate - Answers-geared towa...

Annual Report - Answers-A report issued annually by a corporation to its stockholders. It contains basic financial statements as well as management's analysis of the firm's past operations and future prospects. Balance Sheet - Answers-A statement of a firm's financial position at a specific po...

how is capital transferred between investors and borrowers? - Answers-- direct transfers -investment banking house -financial intermediaries What are the different types of financial markets? - Answers--Physical assets vs Financial Assets -Money vs Capital -Primary vs Secondary -Spot vs Futu...

Balance of Payments - Answers-An accounting statement that records a country's trade in goods, services, and financial assets with the rest of the world. Current Accounts (CA) - Answers-Records the flow of goods, services, and transfers. Includes merchandise (trade balances), service transaction...

Current Ratio - Answers-is the ratio of current assets to current liabilities. Current Ratio - Answers-It indicates the extent to which the current liabilities, which must be paid within a year Quick Ratio - Answers-acid test ,Current assets excluding inventory divided by current liabilities; ...

value - Answers-ability to generate future cash flows financial management - Answers-the allocation of resources under uncertainty through time objective of financial managers - Answers-maximize shareholders' wealth *in an efficient market, shareholders can modify patterns on consumption thr...

The pro-forma Income Statement is the same as the common-size Income Statement but it looks at the future rather than the past of the firm. t/f - Answers-false Trend forecasting of Sales is more likely to be useful when the R2 of the regression of Sales on time is low rather than high. t/f - Ans...

The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance - Answers-are likely to take on greater risks than they otherwise would. The possibility that the failure of one bank can hasten the failure of other banks ...

Individual Tax Calculations - Answers-Gross income - deductions, adjusted income - deductions, taxable income (tax - tax credits) Corporate Tax Calculations - Answers-Gross income - deductions, taxable income (tax - tax credits) Deductions for corporate taxes - Answers-Ordinary and necessary b...

Find your hometown's nearest Angel Network. What is their name and an idea of their investment preferences? - Answers-- North Texas Angel Network focuses on accessing a wide range of industry expertise across their network in assessing investment opportunities What are three of the sources of en...

CPM interest rates increase - loss to lender or borrower - Answers-Lender If the mortgage interest rate decreases, will lenders benefit from it? - Answers-No The effects on CPM lenders An increase in the interest rate - Answers-Loss for lender The effects on CPM lenders A decrease in the ...

Annuities - Answers-Earlier money is worth more -Year 6 vs. year 9 (accept year 6) -Twin example: If one twin begins to invest at age 25, and the other begins to invest at age 30, who's money will be worth more? Age 25 -An annuity that starts today rather than the end of the month is worth more ...

Corporate Finance Questions - Answers-1. What long term investments should you take on? 2. Where will you get the long term financing to pay for your investments? 3. How will you manage your everyday financial activities? Capital Budgeting - Answers-The process of planning and managing a firm'...

Name two benefits of a financial system. - Answers--Savers can be more diversified by investing in banks or mutual funds -greater liquidity A financial system transfers money between two groups. Who are the two groups? - Answers--Savers to borrowers Who came up with the concept of the "Invis...

The chief executive officer (or CEO) is the top executive officer, and he or she reports to the board. The chairperson of the board often also serves as the CEO. Most firms also have a chief operating officer (COO) and a chief financial officer (CFO). The COO is often designated as the firm's presi...

Capitalism - Answers-Economic system with private and corporate ownership of property and competitive markets. However, since its origins in the 18th and 19th century it was also often correlated to large-scale collusion between governments and private industries such as through establishing royal c...

Consumer Purchasing Phases - Answers-1. Pre-shopping - Information gathering/sources 2. Evaluation of Alternatives - Attribute assessment, Price analysis 3. Selection and Purchase - Negotiation, cash or credit, Buyer beware (subliminal sales pitches) 4. Post purchase Activities - Maintenance, ins...