GEB1011 Test 2 Questions with All Correct Answers
What is a convertible security? - Answer- Issuing bonds or preferred stock that contains a conversion feature
What is the primary market? - Answer- Financial market in which firms and governments issue securities and sell them initially to th...
GEB1011 Test 2 Questions
with All Correct Answers
What is a convertible security? - Answer- Issuing bonds or preferred stock that contains
a conversion feature
What is the primary market? - Answer- Financial market in which firms and
governments issue securities and sell them initially to the general public
What is an initial public offering (IPO)? - Answer- When a company offers stock for sale
to the general public for the 1st time
What is a secondary market? - Answer- Collection of financial markets in which
previously issued securities are traded among investors
What is the New York Stock Exchange? - Answer- The most famous and one of the
oldest stock markets in the world
What is a commercial bank? - Answer- The largest and probably the most important
financial institution in the United States and in most other countries as well
What is FDIC? - Answer- Federal agency that insures deposits at commercial and
saving banks
What is the limit for an FDIC insurance? - Answer- $250,000
What financial institutions are insured under FDIC? - Answer- Banks
What is a non-depository institution? - Answer- Accept funds from businesses and
households, much of which they then invest
What are 3 examples of a non-depository institution? - Answer- 1. Insurance companies
2. Pension funds
3. Finance companies
What is a mutual fund? - Answer- Financial intermediaries that raise money from
investors by selling shares
What is the federal reserve system's most important function? - Answer- Controlling the
supply of money and credit
, Which tool is so powerful it can cause a sudden and dramatic impact on the money
supply so it is rarely used? - Answer- Reserve requirements
Which tool is used most often? - Answer- Open market operations
What is insider trading? - Answer- Use of material nonpublic information about a
company to make investment profits
What is the role of a financial manager? - Answer- Executives who develop and
implement their firm's financial plan and determine the most appropriate sources and
uses to funds
What is a financial plan? - Answer- Document that specifies the funds needed by a firm
for a period of time, the timing of inflows and outflows, and the most appropriate
sources and uses of funds
What are the basic questions a financial plan answers? - Answer- 1. What funds will the
firm require during the planning period
2. When will it need additional funds
3. Where will it obtain the necessary funds
How does a financial plan differ from an operational plan? - Answer- Operational plans
or usually short term as a financial plan is normally long term
What is a marketable security? - Answer- low-risk securities that either have short
maturities or can be easily sold in secondary markets
What is an account receivable? - Answer- Uncollected credit sales and can be a
significant asset
What is a short-term asset? - Answer- Consist of cash and assets that can be or are
expected to be converted into cash within a year
What is a long-lived asset? - Answer- assets that are expected to produce economic
benefits for more than 1 year
What is a firm's capital structure? - Answer- A firm's debt and equity capital
What is the principle of leverage? - Answer- Increasing the rate of return on funds
invested by borrowing funds
Most manufacturing businesses are considered small if they employ fewer than
_______ workers - Answer- 500
Which of the following is least likely to be a small business? - Answer- A nursing home
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