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COB 300B Exam STUDY GUIDE |Questions with 100% Correct Verified Answers
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COB 300B Exam STUDY GUIDE |Questions with 100% Correct Verified Answers
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COB 300B Exam STUDY GUIDE |Questions with100% Correct Verified Answers
Goal of the business enterprise - ✔✔the increase in value to the firm
Agency relation - ✔✔arises when one person (the principle, i.e. shareholders) delegates
decision-making authority/control over resources to another (the agent, i.e. managers)
Agency problem - ✔✔Conflict of interest between principal and agent
One party is expected to act in another's best interests
Sarbanes-Oxley Act - ✔✔A law passed by Congress that requires the CEO and CFO to certify
that their firm's financial statements are accurate.
Business Ethics - ✔✔principles and standards that determine acceptable conduct in business
shareholder - ✔✔A person who invests in a corporation by buying stock and is a partial
owner
bondholder - ✔✔someone who owns bonds and receives the interest payments
Market capitalization calculation - ✔✔# Outstanding Shares * Market Price
The Capital Allocation Process - ✔✔In a well-functioning economy, capital flows efficiently
from those who supply capital to those who demand it.
, suppliers of capital - ✔✔individuals and institutions with "excess funds." These groups are
saving money and looking for a rate of return on their investment.
Demanders or users of capital - ✔✔individuals and institutions who need to raise funds to
finance their investment opportunities. These groups are willing to pay a rate of return on the
capital they borrow.
What is a market? - ✔✔a group of buyers and sellers of a particular good or service
financial markets - ✔✔financial institutions through which savers can directly provide funds
to borrowers
Importance of Financial Markets - ✔✔-Well-functioning financial markets facilitate the flow
of capital from investors to the users of capital.
-Markets provide savers with returns on their money saved/invested, which provide them
money in the future.
-Markets provide users of capital with the necessary funds to finance their investment projects.
-Well-functioning markets promote economic growth.
-Economies with well-developed markets perform better than economies with poorly-
functioning markets.
Physical Asset Markets - ✔✔(also called "tangible" or "real" asset markets) are for products
such as wheat, autos, real estate, computers, and machinery
Financial Asset Markets - ✔✔deal with stocks, bonds, notes, and mortgages
spot market - ✔✔market in which a transaction is made immediately at the prevailing price
futures market - ✔✔markets where you can buy or sell something at a future date
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