Fin 301 - Study guides, Class notes & Summaries

Capital budgeting - Answer-planning and managing a firm's long term investments Ex: deciding to open at new location, or what computer system to use Capital Structure - Answer-mixture of debt and equity maintained by a firm Ex: How much should firm borrow and what are least expensive sources of funds for firm Working Capital Management - Answer-firm's short-term assets and liabilities Ex: day-to-day activities, short term assets like inventory and short term liabilities like money owe...

Beta is used in the capital asset model primarily as a measure of - Answer-Risk According to the principles of finance, what should be management's goal when making corporate decisions? - Answer-Maximizing Shareholder Value The basic principles of finance dictate that in the short-run, stock prices are driven by - Answer-Supply & Demand All else equal, which of the following stocks should have the highest expected return? Stock A: Standard Deviation - 15% Stock B: Standard Deviat...

Three Primary Areas of Finance - Answer-1. Corporate finance : how they manage $ 2. Institutions & Markets : dominate economic market 3. Investments : decisions of buying stock/market Basic Corporate Financial Decisions - Answer-The Investment Decision: allocating scarce resources across competing users? The Financial Decision: raising funds to finance these projects? The Dividend Decision: returning funds to investors? corporate financial toolbox- accounting statements & ratios, prese...

Discount - Answer-Multiply a number by less than one. Discount rate - Answer-A function of time and risk: discount rate=f(time, risk) Discount factor - Answer-A function of both time and the discount rate: [discount rate=f(time, discount)] Present value - Answer-of an investment is the sum of the expected cash flows multiplied by their respective discount rate. Three-Step Approach [DCF Valuation] - Answer-1. Develop a set of expected cash flows. 2. Estimate the discount rate and cal...

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...

Using the balance sheet model of the firm, corporate finance may be thought of as the analysis of three primary subject areas. What are these areas: - Answer-capital budgeting, capital structure, net working capital capital structure - Answer-the mix of long-term debt and equity of a firm Which of the following should be the main goal of the financial manager of a corporation? - Answer-to maximize current market value per share of company stock Secondary market - Answer-the market for t...

3 general concepts of finance - Answer-(1) more value is preferred to less (2) the sooner cash is received, the more valuable it is (3) less risky assets are more valuable than riskier assets The study of finance consists of four interrelated areas: - Answer-1. Financial institutions and markets 2. Investments 3. Financial services 4. Managerial (business) finance 3 major forms of business organization in the U.S. - Answer-Proprietorship Partnership Corporation Proprietorship - A...

Which of the following concerning the relationship between risk and return is correct? A. A risk taker 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% B. Investors generally demand higher return for less risky investments C. Riskier investments tend to have lower returns D. Safer investments historically provide the highest returns E. A risk averse investor would prefer a sto...

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...