BUSINESS MATH FINAL EXAM
QUESTIONS WITH COMPLETE
SOLUTIONS
Define capital gain/capital loss - ANSWER-Gain (or loss) on the sale of a capital asset
Define speculation - ANSWER-An asset whose value depends solely on supply and
demand
Define investment - ANSWER-spending by firms on capital
tax deferred investments - ANSWER-Earnings such as interest, dividends, or capital
gains that accumulate tax free until the investor takes constructive receipts of the gains
Define Dividends - ANSWER-Payments by a corporation to shareholders, made in
either cash or stock
Are U.S. government securities considered to be a safe, low-risk investment? -
ANSWER-No
What is political and regulatory risk? - ANSWER-Regulatory risk- a risk that change in
laws and regulations will impact a security, business or market
Bull Market - ANSWER-a steady rise in the stock market over a period of time
What is an IPO? - ANSWER-The first time a company sells stock to the public (Initial
Public Offering)
bear market - ANSWER-A steady drop in the stock market over a period of time
proxy - ANSWER-a person authorized to act for another
Does a company have to pay dividends? - ANSWER-Companies are not required to at
all
mutual fund - ANSWER-an investment in which investors pool their money to buy
stocks, bonds, and other securities
Do mutual funds help small investors diversify? - ANSWER-Yes
Stock splits can be used to: - ANSWER-adjust the market price of a stock such that it
falls within a preferred trading range.
, What are the keys to financial success outlined in Ch. 17? - ANSWER-Become
knowledgeable, don't procrastinate, live below your means, realize you aren't
indestructible, protect your stuff, embrace the "B" word (budget),
Key elements to effective debt management stated in ch. 17? - ANSWER-Spend less
than you earn and budget your money, know the costs, understand the difference
between good and bad debt, make sure you can repay what you borrow, keep credit
score high, don't live w bad debt
What are some of the results of too much debt? - ANSWER-Lose everything, credit
score drops
Part of life event 1, Getting started, is laying the groundwork. What things should you do
in this step? - ANSWER-Track expenses and create a budget, control debt, establish an
emergency fund, insure yourself, control your credit score, keep current on personal
finance
Liquidity - ANSWER-The ease with which an asset can be converted into cash.
Financial Planning - ANSWER-A process of tracking and anticipating income and
expenditures
Liabilities - ANSWER-what a company owes
Emergency Fund - ANSWER-A savings account that is set aside to be used only for
emergency expenses
compound interest - ANSWER-interest earned on both the principal amount and any
interest already earned
personal exemption - ANSWER-exemption for someone who cannot be claimed as a
dependent by another taxpayer
Deductions on a tax return - ANSWER-Medical expenses
progressive tax system - ANSWER-involves higher tax rates on those earning higher
incomes
Gross Income - ANSWER-Income before taxes
Net income - ANSWER-Also called profit. Calculated as the Revenue - Expenses
liquid assets - ANSWER-cash and items that can be quickly converted to cash
Benefit of automating your savings - ANSWER-Deducting from your paycheck to your
savings, they're not in liquid reservoir therefore less likely to spend the money,
QUESTIONS WITH COMPLETE
SOLUTIONS
Define capital gain/capital loss - ANSWER-Gain (or loss) on the sale of a capital asset
Define speculation - ANSWER-An asset whose value depends solely on supply and
demand
Define investment - ANSWER-spending by firms on capital
tax deferred investments - ANSWER-Earnings such as interest, dividends, or capital
gains that accumulate tax free until the investor takes constructive receipts of the gains
Define Dividends - ANSWER-Payments by a corporation to shareholders, made in
either cash or stock
Are U.S. government securities considered to be a safe, low-risk investment? -
ANSWER-No
What is political and regulatory risk? - ANSWER-Regulatory risk- a risk that change in
laws and regulations will impact a security, business or market
Bull Market - ANSWER-a steady rise in the stock market over a period of time
What is an IPO? - ANSWER-The first time a company sells stock to the public (Initial
Public Offering)
bear market - ANSWER-A steady drop in the stock market over a period of time
proxy - ANSWER-a person authorized to act for another
Does a company have to pay dividends? - ANSWER-Companies are not required to at
all
mutual fund - ANSWER-an investment in which investors pool their money to buy
stocks, bonds, and other securities
Do mutual funds help small investors diversify? - ANSWER-Yes
Stock splits can be used to: - ANSWER-adjust the market price of a stock such that it
falls within a preferred trading range.
, What are the keys to financial success outlined in Ch. 17? - ANSWER-Become
knowledgeable, don't procrastinate, live below your means, realize you aren't
indestructible, protect your stuff, embrace the "B" word (budget),
Key elements to effective debt management stated in ch. 17? - ANSWER-Spend less
than you earn and budget your money, know the costs, understand the difference
between good and bad debt, make sure you can repay what you borrow, keep credit
score high, don't live w bad debt
What are some of the results of too much debt? - ANSWER-Lose everything, credit
score drops
Part of life event 1, Getting started, is laying the groundwork. What things should you do
in this step? - ANSWER-Track expenses and create a budget, control debt, establish an
emergency fund, insure yourself, control your credit score, keep current on personal
finance
Liquidity - ANSWER-The ease with which an asset can be converted into cash.
Financial Planning - ANSWER-A process of tracking and anticipating income and
expenditures
Liabilities - ANSWER-what a company owes
Emergency Fund - ANSWER-A savings account that is set aside to be used only for
emergency expenses
compound interest - ANSWER-interest earned on both the principal amount and any
interest already earned
personal exemption - ANSWER-exemption for someone who cannot be claimed as a
dependent by another taxpayer
Deductions on a tax return - ANSWER-Medical expenses
progressive tax system - ANSWER-involves higher tax rates on those earning higher
incomes
Gross Income - ANSWER-Income before taxes
Net income - ANSWER-Also called profit. Calculated as the Revenue - Expenses
liquid assets - ANSWER-cash and items that can be quickly converted to cash
Benefit of automating your savings - ANSWER-Deducting from your paycheck to your
savings, they're not in liquid reservoir therefore less likely to spend the money,
