FN 301 Exam 1 Review (latest update)
questions with correct answers
Mutual Funds - correct answer ✔✔publicly available to retail and institutional investors
Hedge funds - correct answer ✔✔private and restrict their investors to wealthy, sophisticated individuals
and institutions, and have more flexibility regarding what they can buy
Financial Intermediary - correct answer ✔✔a corporation that takes funds from investors and then
provides those funds to those who need capital
International Finance - correct answer ✔✔a global specialization within one of the previous main areas
of finance
Fintech - correct answer ✔✔the combination of technology and finance
Capital Budgeting - correct answer ✔✔long term investments or projects should the business take on
Capital Structure - correct answer ✔✔how should we pay for our assets, should we use debt or equity
Working Capital Management - correct answer ✔✔manage the day-to-day finances of the firm
Cheif Financial Officer - correct answer ✔✔the top financial manager within a firm
Treasurer - correct answer ✔✔oversees cash management, credit management, capital expenditures, &
financial planning
Controller - correct answer ✔✔oversees taxes, cost accounting, financial accounting, & data processing
, Advantages of corporation - correct answer ✔✔limited liability, unlimited life, transfer to ownership is
easy, easier to raise capital, separation of ownership and management
Disadvantages of corporation - correct answer ✔✔double taxation, separation of ownership
The goal of a corporation - correct answer ✔✔maximizing shareholder wealth
Agency of problem - correct answer ✔✔conflict of interest between principal and agent
Primary Market - correct answer ✔✔the corporation is the seller, and the transaction raises money for
the corporation
Secondary Market - correct answer ✔✔where buying and selling of previously issued securities occurs
between investor; provides liquidity for investors
Money Market - correct answer ✔✔financing that is repaid within one year (bonds with maturity < 1yr)
Capital Market - correct answer ✔✔long-term financing arrangements (bonds with maturity > 1yr,
stock/equities)
Debt Market - correct answer ✔✔includes all credit arrangements and securities (bonds/mortgages)
Equity Market - correct answer ✔✔companies issue stock in exchange for funds
Liquidity - correct answer ✔✔ability to convert cash quickly
Balance sheet - correct answer ✔✔a snapshot of the firm's assets, liabilities, and the difference between
the two, equity at a given point in time
Book value - correct answer ✔✔the balance sheet value of the assets, liabilities, and equity
questions with correct answers
Mutual Funds - correct answer ✔✔publicly available to retail and institutional investors
Hedge funds - correct answer ✔✔private and restrict their investors to wealthy, sophisticated individuals
and institutions, and have more flexibility regarding what they can buy
Financial Intermediary - correct answer ✔✔a corporation that takes funds from investors and then
provides those funds to those who need capital
International Finance - correct answer ✔✔a global specialization within one of the previous main areas
of finance
Fintech - correct answer ✔✔the combination of technology and finance
Capital Budgeting - correct answer ✔✔long term investments or projects should the business take on
Capital Structure - correct answer ✔✔how should we pay for our assets, should we use debt or equity
Working Capital Management - correct answer ✔✔manage the day-to-day finances of the firm
Cheif Financial Officer - correct answer ✔✔the top financial manager within a firm
Treasurer - correct answer ✔✔oversees cash management, credit management, capital expenditures, &
financial planning
Controller - correct answer ✔✔oversees taxes, cost accounting, financial accounting, & data processing
, Advantages of corporation - correct answer ✔✔limited liability, unlimited life, transfer to ownership is
easy, easier to raise capital, separation of ownership and management
Disadvantages of corporation - correct answer ✔✔double taxation, separation of ownership
The goal of a corporation - correct answer ✔✔maximizing shareholder wealth
Agency of problem - correct answer ✔✔conflict of interest between principal and agent
Primary Market - correct answer ✔✔the corporation is the seller, and the transaction raises money for
the corporation
Secondary Market - correct answer ✔✔where buying and selling of previously issued securities occurs
between investor; provides liquidity for investors
Money Market - correct answer ✔✔financing that is repaid within one year (bonds with maturity < 1yr)
Capital Market - correct answer ✔✔long-term financing arrangements (bonds with maturity > 1yr,
stock/equities)
Debt Market - correct answer ✔✔includes all credit arrangements and securities (bonds/mortgages)
Equity Market - correct answer ✔✔companies issue stock in exchange for funds
Liquidity - correct answer ✔✔ability to convert cash quickly
Balance sheet - correct answer ✔✔a snapshot of the firm's assets, liabilities, and the difference between
the two, equity at a given point in time
Book value - correct answer ✔✔the balance sheet value of the assets, liabilities, and equity
