Fin301 - Study guides, Class notes & Summaries

b - Answer-1. Securities with maturities of one year or less are classified as A) capital market instruments. B) money market instruments. C) preferred stock. D) none of the above c - Answer-2. Which of the following is not a money market security? A) Treasury bill B) negotiable certificate of deposit C) common stock D) federal funds a - Answer-3. ________ are sold at an auction at a discount from par value. A) Treasury bills B) Repurchase agreements C) Banker's acceptances D)...

Mary owns a risky stock and anticipates earning 16.5 percent on her investment in that stock. Which one of the following best describes the 16.5 percent rate? - Answer-Expected return Stock A comprises 28 percent of Susan's portfolio. Which one of the following terms applies to the 28 percent? - Answer-Portfolio weight Systematic risk is defined as: - Answer-any risk that affects a large number of assets. Unsystematic risk can be defined by all of the following except: - Answer-market ...

Which of the following is a stakeholder of a firm? -Taxpayers -Central bank -The firm's competitor -Employees - Answer-employees The audit committee reports directly to the - Answer-board of directors Which of the following is an example of frivolous agency costs? -Excessive perks. -Investment in Land & Buildings. -Providing lunch for the employees. -Hiring external auditors to certify accounting statements despite having internal auditors. - Answer-excessive perks A stakeholde...

Maximize the shareholder value of the firm - Answer-What is the primary goal of financial managers? c. In class, my analogy for net working capital was "cash in your wallet"; a firm may need short term funding in case on an emergency, but it isn't making you much of a return - Answer-Which of the following statements about Net Working Capital is TRUE? a. The management of net working capital is part of the Capital Budgeting function of financial managers b. In the cash flow identity ques...

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...

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...

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...

The market price of a bond - Answer-The present value of the promised cash flows (interest and principal payments) discounted at the current market rate of interest for bonds of similar risk. Market for corporate bonds - ENORMOUS - Answer-most important investors in corporate bonds are big institutional investors such as life insurance companies, pension funds, and mutual funds. Secondary market transactions - Answer-take place through dealers in over-the-counter market OTC. The term: T...

Refer to the HCP bond example in Chapter 1 of the IBF text and Class Handout 1. In HCP's Cash Flow Statement, what is the total Cash Flow from Operating Activities for Quarters 3 and 4? (Refer to in-class Notes) - Answer-296 182.7 + 113.3 = 296.00 Refer to the cash flow table on Lecture Handout page 14, and recall that, for example, Cash flow for year = Cash flow for Q1 + Cash flow for Q2 +... + Cash flow for Q4. Refer to the HCP bond example in Chapter 1 of the IBF text and Class Hand...

There are four basic principles of finance. Which principle correctly describes the following statement: "A dollar today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today"? - Answer-Principle 1: Money has a time value In a large corporation the primary responsibility for overseeing the firm's finance-related activities falls to the - Answer-Chief Financial Officer (CFO) The typical business organi...