Financial Management - C214 Exam UPDATED QUESTIONS AND CORRECT ANSWERS

Financial Management - C214 Exam
UPDATED QUESTIONS AND CORRECT
ANSWERS
Capital - CORRECT ANSWER Consists of the resources that the company will utilize to fund
the business. It can be considered stock sales, bonds, bank loans, etc.



Working Capital - CORRECT ANSWER The basket of resources a company will use to run the
business, such as Cash, Accounts, Receivable, and inventory. It is often defined as the Current Assets
minus Current Liabilities



Areas of Finance - CORRECT ANSWER - Corporate Finance

(Focuses on financial decision making by a firm's management.)

- Investments

(This area is devoted to understanding the various types of financial instruments—such as stocks,
bonds, etc.—and how to value these instruments.)

- Banking/Financial Institutions

(Almost everyone taking this course will have already visited a bank and will understand that banks
make money by paying depositors a smaller interest rate than the interest rate they charge to
borrowers.)



Economics is a subfield of Finance



True or False - CORRECT ANSWER False



Which of the following is not an example of firm capital?



Cash

Machinery

Labor

Financial markets - CORRECT ANSWER Financial markets

,Capital is defined as a financial asset.



True or False - CORRECT ANSWER True



Corporate finance is devoted to understanding various types of financial instruments.



True or False - CORRECT ANSWER False



INVESTMENTS is devoted to understanding various types of financial instruments.



Which of the following is an example of firm capital?



Bank deposits

Cash

The firm's worth

None of these choices - CORRECT ANSWER Cash



Corporate finance focuses on the decision making by the management of the firm.



True or False - CORRECT ANSWER True



What are the three important areas of finance discussed in this section?



A. Corporate Finance, Investments, and Banking/financial institutions



B. Government Finance, WAAC, Ratios



C. Neither of these - CORRECT ANSWER A. Corporate Finance, Investments, and
Banking/financial institutions

,Banks make money when interest rates they charge to borrowers are less than interest rates they pay
depositors.



True or False - CORRECT ANSWER False



Banks make money when interest rates they charge to borrowers are MORE than interest rates they
pay depositors.



Stocks and bonds are two types of financial instruments.



True or False - CORRECT ANSWER True



Stock represents ownership in a particular company.



True or False - CORRECT ANSWER True



Companies can raise capital by issuing bonds or stocks.



True or False - CORRECT ANSWER True



A stock is a debt instrument issued by corporations.



True or False - CORRECT ANSWER False



A Treasury bond is a debt instrument issued by corporations.



True or False - CORRECT ANSWER False



A bond is a debt instrument issued by corporations or governments.



True or False - CORRECT ANSWER True

, A stock is a share of ______________ in a particular company. - CORRECT ANSWER
ownership



A bond is similar to a loan.



True or False - CORRECT ANSWER True



Primary Market - CORRECT ANSWER The financial market where securities (stocks and/or
bonds) are first sold



Syndicate - CORRECT ANSWER A group of intermediaries that is used to oversee the
issuance of stocks and/or bonds. Syndicates are generally made up of large investment banks or other
types of institutional investors.



Primary financial markets are markets where issuers place new securities with investors.



True or False - CORRECT ANSWER True



What are the two ways a syndicate can place a bond? - CORRECT ANSWER Competitive sale
or negotiated sale



An IPO is a seasoned equity offering.



True or False - CORRECT ANSWER False



An IPO occurs on the primary market.



True or False - CORRECT ANSWER True



Syndicates are generally made up of investment banks and other institutional investors.