FIN 461 Exam -1 Study Guide QUESTIONS WITH ANSWERS

FIN 461 Exam #1 Study Guide
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QUESTIONS WITH ANSWERS |\ |\




Commonly analysts evaluate an investment in some type of
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security that has characteristics of an ____(representing an
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ownership position), or ____, (representing a lending position). -
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CORRECT ANSWERS ✔✔equity debt |\ |\ |\




In arriving at investment decisions or recommendations analysts
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need to evaluate the _______, _____ ______, and ____ of the
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company issuing the securities. - CORRECT ANSWERS
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✔✔performance financial position value |\ |\ |\




Types of economic decisions:
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- evaluating an _____ ______ for inclusion in portfolio; individual or
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institutional |\




- evaluating a _____ or _______ candidate; corporate manager
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- evaluating a ________ or ______ division of a parent company
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- deciding whether to make a _____ _____ or other _____ equity
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investment |\




- determining the ___________ of a company that has made a loan
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request; credit loan officer
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- extending ____ to a customer
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- examining compliance with ____ _____ or other contractual
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agreements

,- assigning a ____ ____ to a company or bond issue; bond rating
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(measure of default risk) |\ |\ |\




- valuing a ______ for making a recommendation to others;
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analysts |\




- forecasting future ____ _____ and ____ ____ - CORRECT ANSWERS
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✔✔equity investment merger acquisition subsidiary operating
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venture capital private creditworthiness credit debt covenants
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debt ratio security net income cash flow
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Central focus of financial analysis:|\ |\ |\ |\




- Does the company earn a ____ ___ _____ that exceeds the ____
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___ ______? |\




- Can the company profitably ____ its business?
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- Does the company generate ____ _____ greater than the _______?
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- CORRECT ANSWERS ✔✔return on capital cost of capital grow
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cash flow obligations|\ |\




Analysts are concerned with factors that affect ____ to the
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company's future performance and financial position. - CORRECT
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ANSWERS ✔✔risks |\




the ability to earn a profit from delivering goods and services -
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CORRECT ANSWERS ✔✔profitability |\ |\




the ability to produce cash receipts in excess of cash
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disbursements - CORRECT ANSWERS ✔✔cash flow generating |\ |\ |\ |\ |\ |\ |\


ability

, represents the excess of the prices at which goods or services
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are sold over all the costs of providing those goods and services
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(regardless of when cash is received or paid) - CORRECT
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ANSWERS ✔✔profit |\




Positive cash flows from operations provides ______ in funding
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need for investments and taking advantage of attractive business
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opportunities- also source of _____ to providers of capital. -
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CORRECT ANSWERS ✔✔flexibility returns
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Importance of cash flow to creditors is a _______ claim. -
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CORRECT ANSWERS ✔✔contractual |\ |\




Importance of cash flow to shareholders is a _____ claim. -
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CORRECT ANSWERS ✔✔residual |\ |\




the ability to meet short-term obligations - CORRECT ANSWERS
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✔✔liquidity


the ability to meet long-term obligations - CORRECT ANSWERS
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✔✔solvency


Current EPS and trends in EPS are indicators of _____ ______. -
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CORRECT ANSWERS ✔✔future profitability
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= P/E ratio x EPS - CORRECT ANSWERS ✔✔price
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