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COB 300 Finance Exam 1 Study Guide questions well answered already passed
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COB 300 Finance Exam 1 Study Guide questions well answered already passed
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COB 300 Finance Exam 1 Study GuideFinance - correct answer ✔✔the system that includes the circulation of money, the granting of credit,
the making of investments, and the provision of banking facilities
Financial Management (Corporate Finance) - correct answer ✔✔focuses on decisions relating to how
much and what type of assets to acquire, how to raise the capital needed to purchase assets, and how to
run the firm as to maximize its value; same rules apply to both for-profit and not-for-profit
Capital Markets - correct answer ✔✔relate to the markets where interest rates, along with stock and
bond prices, are determined
Federal Reserve System - correct answer ✔✔regulates banks and controls the supply of money
Securities and Exchange Commission (SEC) - correct answer ✔✔regulates the trading of stock and bonds
in public markets
Investments - correct answer ✔✔relate to decisions concerning stock and bonds and include a number
of activities
Security Analysis - correct answer ✔✔deals with finding the proper value of individual securities
Portfolio Theory - correct answer ✔✔deals with the best way to structure portfolios, or "baskets" of
stock and bonds
Market Analysis - correct answer ✔✔deals with the issue of whether stock and bond markets at any
given time at too high, too low, or about right; has to do with behavioral finance
Behavioral Finance - correct answer ✔✔where investor psychology is examined in an effort to determine
whether stock prices have been bid up to unreasonable heights in a speculative bubble or driven down
to unreasonable lows in a fit of irrational pessimism.
,Hierarchy of Organizations - correct answer ✔✔- Board of Directors
- CEO
- COO
- CFO
COO - correct answer ✔✔often the firm's president and directs the firm's operations: marketing,
manufacturing, sales, and other operating departments
CFO - correct answer ✔✔senior vice president and is in charge of accounting, finance, credit policy,
decisions regarding asset acquisition, and investor relations which involves communications with
stockholders and the press
Sarbanes-Oxley Act of 2002 - correct answer ✔✔provides sweeping new legal protection for employees
who report corporate misconduct
Defined Contribution Pension Plan - correct answer ✔✔each year the company puts a specified number
of money into an account that belongs to the employee and the employee must decide how this money
is invested and how much risk they are willing to take
Four Main Forms of Business Organizations - correct answer ✔✔1. proprietorships
2. partnerships
3. corporations
4. limited liability companies (LLCs) and limited liability partnerships (LLPs)
Proprietorships - correct answer ✔✔unincorporated business owned by an individual
Advantages of Proprietorship - correct answer ✔✔1. they are easy and inexpensive to form
2. they are subject to few government regulations
3. they are subject to lower income taxes than are corporations
, Limitations of Proprietorship - correct answer ✔✔Unlimited personal liability
Limited life
Transferring ownership is difficult
Difficult to raise capital
Partnership - correct answer ✔✔A legal agreement between two or more people to be jointly
responsible for the success or failure of a business.
Advantages of Parnetship - correct answer ✔✔easy to establish and inexpensive; firm's income is
allocated on a pro rata basis and is taxed individually so they can avoid corporate tax
Limitations of Partnership - correct answer ✔✔unlimited personal liability, difficult to raise capital, life is
limited to owners' lives
Corporations - correct answer ✔✔legal entity created by a state, and is separate and distinct from its
owners and managesr
Advantages of Corporations - correct answer ✔✔ownership of corporations is easily transferable and it
rarely has any effect on the daily operations of the business
- unlimited life
- separation limits stockholders' losses to the amount they invested
Limitation of Corporations - correct answer ✔✔incomes are subjected to double taxation
S Corporations - correct answer ✔✔A special designation that allows small businesses that meet
qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation.
- must have no more than 100 stockholders
LLCs & LLPs - correct answer ✔✔-Provide limited liability protection
-Taxed as a partnership
-Investors have votes in proportion to their ownership interest
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