FINANCE
FINANCE EXAM QUESTIONS AND ANSWERS WELL
ILLUSTRATED.
Finance answer > involves the management of money
-amount, time, risk
Three areas of Finance answer > Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance answer > The activities involved in managing money in a
business environment.
institutions and markets answer > Examines the structure of capital markets, the
role of financial institutions, the process of financial intermediation and how
money flows into the economy
investments answer > focuses on the valuation techniques and how to value
alternative investment opportunities that are provided primarily through financial
markets and institutions
Capital Markets answer > financial markets where issuers and investors buy and
sell debt and equity securities
,FINANCE
Companies Raise capital through... answer > selling debt instruments
selling stocks/ equity instruments
Debt answer > obligation to repay borrowed money
Stock answer > represents ownership in the company
Effect of Technology answer > made cost of transactions lower
more transactions made
creation of new financial instruments
sophisticated hedging and investing practices
World's capital markets include a wide variety of organized exchanged where
financial claims are traded. Claim's include... answer > debt, equity, currencies,
commodities, and other financial assets.
Economic health answer > Go
-level of interest rates, relative currency values, and performance of the stock
markets are a gauge of economic health
Firms
- market value of stock is ultimate indicator of performance
International deregulation of past twenty years answers > opened new sources of
capital for companies throughout the world.
,FINANCE
markets tend to function most efficiently in deregulated environments.
recent breakdowns in accounting and corporate governance at Enron, WorldCom,
Adelphia, and Bernie Madoff Ponzi schemes, and the crippling effect of the
collapse of the credit markets on the commercial and investment banking
institutions has shown that regulation and oversight are necessary to reduce
corruption, greed, and fraud.
Downside of free flow of capital answer > volatility that may be associated with it.
volatility in 2008 at unprecedented levels
-stock markets moving 3 to 5 percent per day, extremes of 10 percent.
Three Sets of Decisions answer > The investment decision
The Financing decision
The dividend decision
The Investment decision answer > how corporate managers should allocate funds
of the company to buy or build projects and investments that will be worth more
than they cost
The Financing Decision answer > how corporate managers should raise money
from institutional and individual investors through the sale of debt and equity
claims for the company to finance the investment projects of the firm
, FINANCE
The Dividend Decision answer > the percentage of the company's profits and cash
from operations that the company should reinvest in the business and how much
should be returned to the company's shareholders in the form of dividends
Net Present Value (NPV) answer > is the value associated with investing in a
project or venture.
Capital Budgeting answer > valuation, planning, and managing of corporate
investments for a firm
Cost of Capital answer > the cost of raising debt and equity for the business
Capital Structure Decision answer > minimizing the cost of capital by using the
right mix of debt and equity
-is an important role for the finance function of the company
Primary Markets answer > The original sale of securities by governments and
corporations
Direct finance answer > A flow of funds from savers to firms through financial
markets, such as the New York Stock Exchange.
Secondary Markets answer > Securities that are bought and sold after the original
sale
Liquidity answer > the speed and ease with which an owner of a security can sell
an investment to another investor or trade it in the securities market
FINANCE EXAM QUESTIONS AND ANSWERS WELL
ILLUSTRATED.
Finance answer > involves the management of money
-amount, time, risk
Three areas of Finance answer > Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance answer > The activities involved in managing money in a
business environment.
institutions and markets answer > Examines the structure of capital markets, the
role of financial institutions, the process of financial intermediation and how
money flows into the economy
investments answer > focuses on the valuation techniques and how to value
alternative investment opportunities that are provided primarily through financial
markets and institutions
Capital Markets answer > financial markets where issuers and investors buy and
sell debt and equity securities
,FINANCE
Companies Raise capital through... answer > selling debt instruments
selling stocks/ equity instruments
Debt answer > obligation to repay borrowed money
Stock answer > represents ownership in the company
Effect of Technology answer > made cost of transactions lower
more transactions made
creation of new financial instruments
sophisticated hedging and investing practices
World's capital markets include a wide variety of organized exchanged where
financial claims are traded. Claim's include... answer > debt, equity, currencies,
commodities, and other financial assets.
Economic health answer > Go
-level of interest rates, relative currency values, and performance of the stock
markets are a gauge of economic health
Firms
- market value of stock is ultimate indicator of performance
International deregulation of past twenty years answers > opened new sources of
capital for companies throughout the world.
,FINANCE
markets tend to function most efficiently in deregulated environments.
recent breakdowns in accounting and corporate governance at Enron, WorldCom,
Adelphia, and Bernie Madoff Ponzi schemes, and the crippling effect of the
collapse of the credit markets on the commercial and investment banking
institutions has shown that regulation and oversight are necessary to reduce
corruption, greed, and fraud.
Downside of free flow of capital answer > volatility that may be associated with it.
volatility in 2008 at unprecedented levels
-stock markets moving 3 to 5 percent per day, extremes of 10 percent.
Three Sets of Decisions answer > The investment decision
The Financing decision
The dividend decision
The Investment decision answer > how corporate managers should allocate funds
of the company to buy or build projects and investments that will be worth more
than they cost
The Financing Decision answer > how corporate managers should raise money
from institutional and individual investors through the sale of debt and equity
claims for the company to finance the investment projects of the firm
, FINANCE
The Dividend Decision answer > the percentage of the company's profits and cash
from operations that the company should reinvest in the business and how much
should be returned to the company's shareholders in the form of dividends
Net Present Value (NPV) answer > is the value associated with investing in a
project or venture.
Capital Budgeting answer > valuation, planning, and managing of corporate
investments for a firm
Cost of Capital answer > the cost of raising debt and equity for the business
Capital Structure Decision answer > minimizing the cost of capital by using the
right mix of debt and equity
-is an important role for the finance function of the company
Primary Markets answer > The original sale of securities by governments and
corporations
Direct finance answer > A flow of funds from savers to firms through financial
markets, such as the New York Stock Exchange.
Secondary Markets answer > Securities that are bought and sold after the original
sale
Liquidity answer > the speed and ease with which an owner of a security can sell
an investment to another investor or trade it in the securities market
