ASU FIN 300 EXAMS SCRIPT ALL QUESTIONS AND
ANSWERS SURE A+
✔✔Securities Exchange Act of 1934 - ✔✔put the SEC in charge of securities regulation
✔✔Securities Acts Amendment of 1975 - ✔✔creation of a national market system, no
fixed commissions
created NASDAQ
✔✔Shelf registration - ✔✔register stock issues in bulk while selling the stock over time
saves money and time
ex: register all 20 million at one but sell 4 mil at a time
✔✔Ethical conflicts in business (page 22) - ✔✔1. agency costs
2. conflicts of interest
3. information asymmetry
✔✔information asymmetry - ✔✔situation in which one party in a business transaction
has information that is unavailable to the other parties in the transaction
✔✔One of the most important institutional players in the financial system - ✔✔Federal
Reserve System
role as the national central bank that controls the money supply
-conducts monetary policies
-interest rates
-federal funds rate
-inflation
, ✔✔Purpose of financial markets - ✔✔bring the *sources* of capital *and users* of
capital *together*
ex: if company needs money can get *loan*, issue/sell stock, sell bonds
✔✔Corporate financing trends - ✔✔*Selling Bonds:*
Bonds 75.5% (*debt*)
(brings more *creditors* in, not diluting votes or profits)
*Interest* = tax deductable expense so *bonds = tax advantage*
*Selling stock:*
(*equity*)
Preferred Stock 4.1%
Common stock 20.4%
(bring more owners/voters in)
dividends paid out after tax, no tax advantage
✔✔Financial markets - ✔✔general term includes # of different types of markets for
creation and exchange of financial assets (such as stocks and bonds)
*competitive* and therefore *highly efficient*
✔✔financial institutions (read more chapter 2 page 13/14) - ✔✔firms such as
commercial banks, credit unions, insurance companies, finance companies, pension
funds
provide financial services to the economy
✔✔financial asset - ✔✔assets that are claims on the cash flows from other assets
(*loans, stocks and bonds*)
claims on *cash flows from real assets*
✔✔Real Assets - ✔✔assets used to produce goods and services (*plant and
equipment*)
*productive assets* are real assets
✔✔Financial system - ✔✔*gather money* from households, businesses or governments
with *surplus to* *channel it to those who need it*
direct and indirectly
ANSWERS SURE A+
✔✔Securities Exchange Act of 1934 - ✔✔put the SEC in charge of securities regulation
✔✔Securities Acts Amendment of 1975 - ✔✔creation of a national market system, no
fixed commissions
created NASDAQ
✔✔Shelf registration - ✔✔register stock issues in bulk while selling the stock over time
saves money and time
ex: register all 20 million at one but sell 4 mil at a time
✔✔Ethical conflicts in business (page 22) - ✔✔1. agency costs
2. conflicts of interest
3. information asymmetry
✔✔information asymmetry - ✔✔situation in which one party in a business transaction
has information that is unavailable to the other parties in the transaction
✔✔One of the most important institutional players in the financial system - ✔✔Federal
Reserve System
role as the national central bank that controls the money supply
-conducts monetary policies
-interest rates
-federal funds rate
-inflation
, ✔✔Purpose of financial markets - ✔✔bring the *sources* of capital *and users* of
capital *together*
ex: if company needs money can get *loan*, issue/sell stock, sell bonds
✔✔Corporate financing trends - ✔✔*Selling Bonds:*
Bonds 75.5% (*debt*)
(brings more *creditors* in, not diluting votes or profits)
*Interest* = tax deductable expense so *bonds = tax advantage*
*Selling stock:*
(*equity*)
Preferred Stock 4.1%
Common stock 20.4%
(bring more owners/voters in)
dividends paid out after tax, no tax advantage
✔✔Financial markets - ✔✔general term includes # of different types of markets for
creation and exchange of financial assets (such as stocks and bonds)
*competitive* and therefore *highly efficient*
✔✔financial institutions (read more chapter 2 page 13/14) - ✔✔firms such as
commercial banks, credit unions, insurance companies, finance companies, pension
funds
provide financial services to the economy
✔✔financial asset - ✔✔assets that are claims on the cash flows from other assets
(*loans, stocks and bonds*)
claims on *cash flows from real assets*
✔✔Real Assets - ✔✔assets used to produce goods and services (*plant and
equipment*)
*productive assets* are real assets
✔✔Financial system - ✔✔*gather money* from households, businesses or governments
with *surplus to* *channel it to those who need it*
direct and indirectly
