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Definition of finance - Answer the art and science of managing wealth Main objective of finance - Answer to make individuals and their businesses better off What decisions do we make in finance? - Answer Deciding what assets to buy/sell and when to buy/sell these assets. Definition of Financial Management - Answer Those activities that create or preserve the economic value of the assets of an individual, small business, or corporation. Financial management comes down to.....

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Benchmarking - Answer comparing a company against an industry standard or common competitor to measure progress and financial performance Trend analysis - Answer comparing a company against its past performance over a 3-5 year period Common size statements - Answer expressing each income statement item as a percentage of sales or on each balance sheet as a percentage of total assets. Allows for comparison against self or against competitors. Financial ratios - Answer relatio...

The art and science of managing wealth - Answer finance Finance is about - Answer making decisions regarding what assets to buy/sell and when to buy/sell these assets The Cycle of Money - Answer Financial intermediaries assist in the movement of money, from the lenders to borrowers and back again Why does the cycle of money make people better off? - Answer The investor receives their initial payment with interest. The bank is allowed to lend out money and also receive intere...

Characteristics of a Stock What do you own/entitled to? - Answer Major financing vehicle for corporations ◦ Provides holders with an opportunity to share in the future cash flows of the issuer. ◦ Holders have "ownership" in the company (residual claim on profit) ◦ Unlike bonds, no maturity date and variable periodic income Stock Terminology - Answer Common stock ◦ First sold (initial public offering or IPO) in the primary markets ◦ Most investors trade stock ...

the organized financial intermediaries and the forums that promote the cycle of money is a good definition of investments corporate finance financial institutions and markets international finance - Answer financial institutions and markets in agency theory, the managers of the business are referred to as ____, and the owners are referred to as ______. bondholders, principals principals, agents stockholders, bondholders agents, principals - Answer agents, principals at th...

1) Which of the following statements best represents what finance is about? A) How political, social, and economic forces affect corporations B) Maximizing profits C) The study of how people and businesses make investment decisions and how to finance those decisions D) Reducing risk - Answer C) The study of how people and businesses make investment decisions and how to finance those decisions 2) From a financial point of view, a company that decides to develop new product is making ...

What is finance? - Answer the art and science of managing money Finance is about making decisions regarding _____ assets to buy/sell and _____ to buy/sell these assets. - Answer what; when What is finance͛s main objective? - Answer to make individuals and their money better off financial intermediaries assist in the movement of money from lenders to borrowers and back again - Answer What is the cycle of money Why does the cycle of money make people better off? - Answer ...

which implies the firm has a stronger ability to meet short-term liabilities than the industry - Answer If the most recent current ratio is greater than the industry average than how does it compare to the overall competition? which implies the firm has a weaker ability to meet short-term liabilities than the industry - Answer If the most recent current ratio is less than the industry average than how does it compare to the overall competition? higher level of leverage - Answer I...

1) If you were given the components of current assets and of current liabilities, what ratio(s) could you compute? A) Acid test or quick ratio B) Average collection period C) Current ratio D) Both A and C E) All of the above - Answer D) Both A and C 2) The debt ratio is a measure of a firm's A) leverage. B) profitability. C) liquidity. D) efficiency. - Answer A) leverage. 3) Which of the following statements is true? A) Current assets consist of cash, accounts r...

What is a Bond? - Answer - long term debt instruments - provide periodic interest income - annuity series - return of the principal amount at maturity Components of a Bond - Answer Par Value, Coupon Rate, Coupon, Maturity Date, Yield to Maturity Par Value - Answer typically $1,000 Coupon Rate - Answer -Annual rate of interest paid -Set by the company at the time of issue and is fixed Coupon - Answer Regular interest payment received by holder per year Maturity Da...

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A company has a holding cost per unit of $5. Each order has a fixed cost of $8 and the annual demand quantity is 150,000 units. What is the company's optimal order quantity? - Answer c. 693 units Correct A company that manufactures 4th of July decorations is looking to improve its inventory management. Which of the following should it consider as it redesigns its inventory system? - Answer a. It should review its past sales data to determine the pattern of demand for its goods. b. I...

A company issued debt that did not grant the bondholders the ability to seize the company's assets to settle the obligation. This debt can be traded on a public exchange. Which of the following best describes this debt? a. Private, secured debt. b. Public, unsecured debt. c. Private, unsecured debt. d. Public, secured debt. - Answer b. Public, unsecured debt. Which of the following is NOT a cash equivalent? a. A treasury bill that matures in two months b. Preferred stock that ...

A company is considering a project that has a discount rate of 5%. It will require an initial investment of $200,000. In the first year, it will have $100,000 in net cash inflows (one year after the initial investment). In year 2, it will have cash inflows of $100,000 (two years after the initial investment), and in year 3 the project will generate $200,000 (three years after the initial investment). What is the project's NPV? Assume all cash flows occur at the end of the year. a. $190,476...

A company has $2 million in machinery expenses and $3 million in rent. It costs $30 per unit in labor costs to produce the good, which is sold for $50 per unit. What is the break even point? - Answer 250,000 units A company produces 100,000 units that sell for $40. The company's variable costs per unit is $25. The company's total fixed costs are $800,000. What is the company's degree of operating leverage? - Answer 2.14 Managers of publicly traded corporations are often comp...

A company issues a bond with the provision that it may pay off the debt early. This bond is subject to which type of risk? Select one: a. Prepayment risk. b. Model risk. c. Interest rate risk. d. All of the above. - Answer a. Prepayment risk. What will $247,000 grow to be in 9 years if it is invested today in an account with an annual interest rate of 11%? Select one: a. $96,558.42 b. $637,365.32 c. $631,835.12 d. $351,268.46 - Answer c. $631,835.12 Approximately how many y...

A company made $10 million in revenue, recorded $2 million in net income, and paid $750,000 in dividends last year. What was the company's pay out ratio last year? Select one: a.20.0% b.37.5% c.2.7% d.7.5% - Answer b.37.5% In which of the following situations would a shareholder prefer to receive stock dividends as opposed to cash dividends? Select one: a.The investor wants to minimize the taxes due on investment income. b.All of these answers c.Cash dividends and stock sales a...

A company has a risk-free rate of 3% and a risk premium of 6%. Its tax rate is 35%. What is the company's cost of debt? - Answer 5.85% A company is thinking of issuing more common stock. Its stock's current market price is $50 a share with an expected dividend annual one year from today of $3 a share. Dividends are expected to grow 5% per year and there are no flotation costs. What is the company cost of new common stock? - Answer 11.00% A company has retained earnings of $1.5 ...

Investment (Module 1 Section 1) - Answer A placement of capital in expectation of deriving income or profit from its use Asset (Module 1 Section 1) - Answer Something or someone of any value; any portion of one's property or effects so considered Debtor (Module 1 Section 1) - Answer A person or firm that owes money, one in debt, or one who owes a debt Return (Module 1 Section 1) - Answer Gain or loss from an investment Shareholder (Module 1 Section 1) - Answer ...