FIN 420 EXAM 1 CAPITAL BUDGETING
CASH FLOW ANALYSIS PRACTICE TEST
PAPER
●● Federal reserve
Answer: independent entity (monetary)
●● R_1 --> "risk free"
Answer: can always pay off the debt by printing money or taxing
citizens
●● Security
Answer: financial instrument that bears a claim on a financial asset such
as stock (equity) or bonds (debt/liability)
●● Owe + Owners
Answer: Own
●● Bondholders are paid interest before stockholders receive
Answer: their dividends.
●● Primary market
,Answer: facilitate initial sale of security into public marketplace, most
often an investment banker utilized to bring securities to the
marketplace.
●● Investment banker functions
Answer: advise firm on raising LTC by issuing stocks and bonds;
distributing new securities; buying securities from issuers, selling to the
public, distributing large blocks of stock; issue securities in compliance
w/ securities laws
●● Red herring
Answer: Preliminary prospectus
●● Prospectus
Answer: Offering document
●● Green shoes
Answer: The right to increase the size of an offering
●● Secondary offering
Answer: A secondary offering by company insiders or other affiliates
●● Managing underwriter (lead underwriter)
, Answer: The lead investment banker
●● Syndicate
Answer: A group of investment banking companies that participate in
the IPO
●● Selling group
Answer: Brokerage firms that take part in selling the initial offering
●● Secondary market
Answer: the buying and selling of existing securities between investors.
●● The New York Stock Exchange (NYSE) is one of the largest
exchanges (auctions) for
Answer: listed stock securities. Other exchanges include the National
Association of Securities. Dealers (Nasdaq) and regional exchanges in
Philadelphia and Chicago.
●● Public float indicates
Answer: the number of shares that are available to the public. Some
stock is by company insiders and are restricted from being sold.
CASH FLOW ANALYSIS PRACTICE TEST
PAPER
●● Federal reserve
Answer: independent entity (monetary)
●● R_1 --> "risk free"
Answer: can always pay off the debt by printing money or taxing
citizens
●● Security
Answer: financial instrument that bears a claim on a financial asset such
as stock (equity) or bonds (debt/liability)
●● Owe + Owners
Answer: Own
●● Bondholders are paid interest before stockholders receive
Answer: their dividends.
●● Primary market
,Answer: facilitate initial sale of security into public marketplace, most
often an investment banker utilized to bring securities to the
marketplace.
●● Investment banker functions
Answer: advise firm on raising LTC by issuing stocks and bonds;
distributing new securities; buying securities from issuers, selling to the
public, distributing large blocks of stock; issue securities in compliance
w/ securities laws
●● Red herring
Answer: Preliminary prospectus
●● Prospectus
Answer: Offering document
●● Green shoes
Answer: The right to increase the size of an offering
●● Secondary offering
Answer: A secondary offering by company insiders or other affiliates
●● Managing underwriter (lead underwriter)
, Answer: The lead investment banker
●● Syndicate
Answer: A group of investment banking companies that participate in
the IPO
●● Selling group
Answer: Brokerage firms that take part in selling the initial offering
●● Secondary market
Answer: the buying and selling of existing securities between investors.
●● The New York Stock Exchange (NYSE) is one of the largest
exchanges (auctions) for
Answer: listed stock securities. Other exchanges include the National
Association of Securities. Dealers (Nasdaq) and regional exchanges in
Philadelphia and Chicago.
●● Public float indicates
Answer: the number of shares that are available to the public. Some
stock is by company insiders and are restricted from being sold.
