C214 - Financial Management Top Compulsory Exam Questions And Correct Answers

C214 - Financial Management Top Compulsory Exam Questions And Correct Answers Accounting ✔✔✔✔ The business function responsible f or creating the historical financial statements. Accounts Payable ✔✔✔✔ A current liability that represents any money the firm owes suppliers and other firms. Typically the firm does not pay interest on accounts payable. Accounts Receivable (AR) ✔✔✔✔ A type of current asset which represents any money owed to the firm for services rendered. Accounts Receivable (AR) Turnover ✔✔✔✔ Credit Sales/AR, a liquidity ratio. Accredited Investors ✔✔✔✔ Investors deemed by the SEC to be s ophisticated enough to purchase non -public securities. Accrual Accounting ✔✔✔✔ Accounting system based on recording accounts based on historical prices and the matching principle. Accruals ✔✔✔✔ Non-cash accounting accounts representing money either owed or due, typically in the short term. Accrued Wages ✔✔✔✔ Wages that the company owes to employees, but has not paid yet. Accumulated Depreciation ✔✔✔✔ The total amount of depreciation claimed against the fixed assets of the firm Additional Paid -in Capital (A PIC) ✔✔✔✔ An equity item on the balance sheet representing the proceeds (price at which stock is initially sold) minus the par value of the stock (note: par is usually $1 per share). Affirmative Covenants ✔✔✔✔ A bond covenant that requires the firm to do so mething. Agency Costs ✔✔✔✔ Costs that are incurred when management does not act in the best interests of shareholders.The costs that result from the principle -agent problem. American Depository Receipts (ADRs) ✔✔✔✔ Certificates issued by U.S. banks and tra ded on U.S. markets but represent shares of foreign stocks Angels ✔✔✔✔ Wealthy individuals who invest in new ventures for the return, thrill, and to help entrepreneurs. Annual Percentage Rate (APR) ✔✔✔✔ The stated annual rate (but ignores compounding) Annual Percentage Yield (APY) ✔✔✔✔ The actual yield including compounding. Also known as effective annual rate. Annuity ✔✔✔✔ A series of payments or receipts. Annuity Due ✔✔✔✔ An annuity that pays at the beginning of each period. Asset Pricing ✔✔✔✔ The process of valuing assets Auction Market ✔✔✔✔ A market with a physical location and where prices are determined by investors' willingness to pay. Average Collection Period (ACP) ✔✔✔✔ AR/Daily Credit Sales, a liquidity ratio. Balance Sheet Equation ✔✔✔✔ Assets = Liabilities + Equity Balance Sheets ✔✔✔✔ One of the three main financial statements. It is a snapshot of the firm's assets, liabilities, and equity at any point in time. Bank Holding Company Act of 1956 ✔✔✔✔ Federal regulation d esigned to protect the banking industry from competition. Beta ✔✔✔✔ A measure of systematic risk for a particular security (or portfolio) that quantifies the security's (or portfolio's) price sensitivity to price changes in the market. Bond Indenture ✔✔✔✔ The legal document detailing a bond. Bond Ratings ✔✔✔✔ A rating assigned to a firm to measure the probability of default by a company like S&P or Moody's. Bonds ✔✔✔✔ Vehicles by which corporations and governments raise debt capital. Book Value ✔✔✔✔ The acc ounting value recorded on the balance sheet. Bulldog Bonds ✔✔✔✔ Bonds issued in the UK and denominated in British pounds Business Risk ✔✔✔✔ The variability associated with operating income. CAPEX ✔✔✔✔ Capital Expenditures, how much the firm spends on fixed assets. CAPM ✔✔✔✔ Capital Asset Pricing Model, a linear model that relates risk and return: Re = Rf + Beta(Rm -Rf). Capacity ✔✔✔✔ Percent of unused productivity of fixed assets.