Business Finance Final Exam Already Solved Correctly.
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Course
Business finance
Institution
Business Finance
Primary goal of financial management - Answer Maximize shareholder wealth
Market price - Answer The stock value based on perceived but possibly incorrect information as seen by the marginal investor, current price of a stock
Intrinsic value - Answer An estimate of a stock's "true" va...
Business Finance Final Exam Already
Solved Correctly.
Primary goal of financial management - Answer Maximize shareholder wealth
Market price - Answer The stock value based on perceived but possibly incorrect information as seen
by the marginal investor, current price of a stock
Intrinsic value - Answer An estimate of a stock's "true" value based on accurate risk and return data.
The intrinsic value can be estimated but not measured precisely, the price at which a stock would sell if
investors had all knowable information about a stock
Primary market - Answer A financial market in which new issues of a security are sold to initial buyers
Secondary market - Answer A financial market in which investors buy and sell existing securities
Proprietorship - Answer A business owned by one person
Partnership - Answer A business in which two or more persons combine their assets and skills
Corporation - Answer A business owned by stockholders who share in its profits but are not personally
responsible for its debts
S corporation - Answer A unique government creation that looks like a corporation but is taxed like sole
proprietorships and partnerships
Limited liability company - Answer Corporation whose members are not personally liable for company
debts and whose earnings are taxed only once, when they are paid out as dividends. It has fewer rules
and restrictions than does an S-corporation.
, Limited liability partnership - Answer All partners are limited partners and not responsible for the debts
and other liabilities of other partners
Capital market - Answer Market for long-term securities, maturity greater than a year. Like Treasury
bonds, corporate bonds, stock.
Money market - Answer A segment of the financial market in which financial instruments with high
liquidity and very short maturities are traded. The money market is used by participants as a means for
borrowing and lending in the short term, from several days to just under a year. Money market securities
consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial
paper, municipal notes, federal funds and repurchase agreements (repos).
Net working capital - Answer Current assets - Current liabilities
Net operating working capital - Answer Current assets - (Current liabilities - Notes payable)
Current ratio - Answer Current assets/Current liabilities
Quick ratio (acid) - Answer [Current assets - Inventories]/Current liabilities
Inventory turnover ratio - Answer Sales/Inventories
Days sales outstanding - Answer Receivables/Average sales per day = Receivables/Annual sales/365
Fixed assets turnover ratio - Answer Sales/Net fixed assets
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