Fin 301 - Study guides, Class notes & Summaries

low risk investments have... - Answer-lower expected returns high risk investments have... - Answer-higher expected returns the least risky investment - Answer-treasury bills the most risky investment - Answer-small company common stocks price/return volatility is a way to measure? - Answer-risk a rational investor requires a higher expected return to accept... - Answer-additional risk model that describes the trade off between risk and return... - Answer-capital asset pricing ...

Finance - Answer-the management of money Corporate Finance - Answer-how companies raise money, how they invest money, how they manage financial resources Capital Markets - Answer-Financial markets where debt instruments and equity securities are bought and sold Investment Decision - Answer-corporate managers need to make sure that the company's money is invested in projects that will be worth more than they cost Financing Decision - Answer-Corporate managers need to decide what comb...

The true owners of the corporation are the ________ - Answer-common stockholders which of the following statements best represents what finance is about? - Answer-The study of how people and business make investment decisions and how to finance those decisions The revenue recognition principle requires that ___________ - Answer-revenue be recognized in the period when the firm becomes entitled to payment for goods or services delivered. Which of the following parties would be interested...

Capital Budgeting - Answer-the process of planning and managing a firm's long-term investments Capital Structure - Answer-the mixture of debt and equity maintained by a firm Working Capital - Answer-a firm's short-term assets and liabilities. Sole Proprietorship - Answer-a business owned by a single individual Partnership - Answer-a business formed by two or more individuals or entities Corporation - Answer-a business created as a distinct legal entity composed of one or more in...

One disadvantage of the corporate form of business ownership is the: A. double taxation of distributed profits B. firm's greater ability to raise capital than other forms of ownership. C. limited liability of its shareholders for the firm's debts. D. firm's potential for an unlimited life. - Answer-A Agency problems are most associated with: A. limited partnerships. B. corporations. C. general partnerships. D. sole proprietorships. - Answer-B Which one of the following actio...

The uncertainty associated with the expected future returns of an asset. Risk is the part of an asset's price movement that is caused by an unexpected event. Risk is measured by the range of possible returns based around an expected return for an investment Standard deviation is used as a measurement of risk. - Answer-Risk Risk related to a surprise event that affects a single company (firm-specific risk). The effects of unsystematic risk can be greatly reduced or eliminated through div...

Net Present Value Definition - Answer-Incremental or marginal net value created by undertaking a project Net Present Value Decision Rule - Answer-1) If the NPV is positive, accept the project 2) Most reliable method to compare and evaluate projects A positive NPV is expected to..? - Answer-* add value to the firm, and therefore increase the wealth of the owners * NPV directly measures the increase in value to the firm Advantages to using the payback period approach? - Answer-1) Easy t...

Maturity of the Bond - Answer-The number of years until the issuer returns the face value to the buyer Face value - Answer-The principal of the bond, which has to be repaid at maturity NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV greater than 0 because it adds value to the firm equal to the NPV. NPV is Measuring - Answer-Value creation Return on Investment - Answer-IRR is Measuring Par - Answer-sales price equals maturity values Discount - Ans...

Firms use capital to: (i) purchase a company (ii) pay for day-to-day expenses (iii) establish or expand a business A) i B) ii C) ii & iii D) all of the above E) iii F) none of the above G) i & iii - Answer-G) i & iii Which of these items are considered part of a firm's capitalization? (i) Assets (ii) Debt Liabilities (iii) Equity (iv) Operating Liabilities A) (i) and (iv) B) None of the listed answers C) (i) and (iii) D) All of the listed answers E) (ii) and (iii) - A...

Which of the following concerning the relationship between risk and return is correct? - Answer-A risk averse investor would prefer a stock with an expected 10% return and a standard deviation of 10% to a stock with an expected return of 10% with a standard deviation of 20% A company that decides to invest to expand its factory for a new product line is an example of which of the following corporate financial decisions: - Answer-Capital Budgeting Which of the following is part of the contr...