fin 2603 final prep with correct answers
100% 2024
capital market - Correct Answer a market place where companies and government can raise long term
funds, a market where money is lent for periods longer than 1 year
cost-benefit principle - Correct Answer sound financial decision making requires that an analysis of the
total cost and the total benefits be conducted - as far as possible, the benefit should be greater than the
cost of any decision
Financial institution - Correct Answer an organisation that acts as a channel between savers and
borrowers of funds (Two main types of financial institutions are banks that pay interest on
deposits from the interest earned on the loans, and insurance companies and mutual
funds that collect funds by selling their policies or shares to the public and provide returns
in the form of periodic benefits and profit payouts.)
financial manager - Correct Answer uses financial statements to make capital-budgeting decisions,
capital structure decisions and working-capital decisions in order to create wealth for the organisation's
shareholders
Money markets - Correct Answer the financial markets for short-term borrowing and lending; provide
short-term liquidity with securities such as treasury bills, commercial paper and bankers'
acceptances
Profitability - Correct Answer the firm's ability to generate revenues that will exceed total costs by using
the firm's assets for productive purposes; may be achieved by marketing products or services to
maintain a sufficient profit margin with the support of promotions at competitive prices directed to
appropriate target markets through appropriate distribution channels
Spread - Correct Answer the difference between the rate charged and the rate paid (Financial
institutions need to invest or lend out their available funds at a rate that exceeds the rate they are
paying to their depositors
, Solvency - Correct Answer the extent to which a firm's assets exceed its liabilities; differs from liquidity
in that liquidity pertains to the settlement of short-term liabilities, while solvency pertains
to the excess of total assets over total liabilities
Time value of money - Correct Answer a concept used to evaluate any financial decision involving
differences in the timing of cash inflows and outflows; a matter of interest that may be earned if money
is available today and invested, or of opportunity cost if an amount will only be received at some future
date - an amount of money today is worth more than it will be at some point in the future
Accounts payable - Correct Answer an account due for payment that, in contrast to a note payable,
does not involve the issuing of a formal written promise to the creditor (the two types of liabilities are
shown separately in the balance sheet)
Auditor's report - Correct Answer a statement that the auditors have audited the annual financial
statements and that these statements fairly represent the financial position of the firm at the
financial year-end date, as well as the results of the firm's operations for the year under
review and its cash flow information
Balance sheet - Correct Answer part of the financial statements of a firm; indicates the firm's financial
position at a specific point in time, that is, what the assets of the firm are worth (at book value) and how
they were financed by means of equity and debt financing
Cash flow statement - Correct Answer part of the financial statements of a f rm; indicates what cash
flows were generated from operating activities, from financing activities and from investment activities
Current assets - Correct Answer those assets that change with the transactions that take place as
business is conducted - inventory (stock), accounts receivable (debtors) and cash deposited or on
hand (In a trading business, inventory would be merchandise for resale; a manufacturing f rm would
hold an inventory of raw material, work-in-process and furnished goods.)
Director's report - Correct Answer an overview of the firm and its state of affairs for the benefit of the
users of the financial statements; deals with the firm's nature of business (including the
100% 2024
capital market - Correct Answer a market place where companies and government can raise long term
funds, a market where money is lent for periods longer than 1 year
cost-benefit principle - Correct Answer sound financial decision making requires that an analysis of the
total cost and the total benefits be conducted - as far as possible, the benefit should be greater than the
cost of any decision
Financial institution - Correct Answer an organisation that acts as a channel between savers and
borrowers of funds (Two main types of financial institutions are banks that pay interest on
deposits from the interest earned on the loans, and insurance companies and mutual
funds that collect funds by selling their policies or shares to the public and provide returns
in the form of periodic benefits and profit payouts.)
financial manager - Correct Answer uses financial statements to make capital-budgeting decisions,
capital structure decisions and working-capital decisions in order to create wealth for the organisation's
shareholders
Money markets - Correct Answer the financial markets for short-term borrowing and lending; provide
short-term liquidity with securities such as treasury bills, commercial paper and bankers'
acceptances
Profitability - Correct Answer the firm's ability to generate revenues that will exceed total costs by using
the firm's assets for productive purposes; may be achieved by marketing products or services to
maintain a sufficient profit margin with the support of promotions at competitive prices directed to
appropriate target markets through appropriate distribution channels
Spread - Correct Answer the difference between the rate charged and the rate paid (Financial
institutions need to invest or lend out their available funds at a rate that exceeds the rate they are
paying to their depositors
, Solvency - Correct Answer the extent to which a firm's assets exceed its liabilities; differs from liquidity
in that liquidity pertains to the settlement of short-term liabilities, while solvency pertains
to the excess of total assets over total liabilities
Time value of money - Correct Answer a concept used to evaluate any financial decision involving
differences in the timing of cash inflows and outflows; a matter of interest that may be earned if money
is available today and invested, or of opportunity cost if an amount will only be received at some future
date - an amount of money today is worth more than it will be at some point in the future
Accounts payable - Correct Answer an account due for payment that, in contrast to a note payable,
does not involve the issuing of a formal written promise to the creditor (the two types of liabilities are
shown separately in the balance sheet)
Auditor's report - Correct Answer a statement that the auditors have audited the annual financial
statements and that these statements fairly represent the financial position of the firm at the
financial year-end date, as well as the results of the firm's operations for the year under
review and its cash flow information
Balance sheet - Correct Answer part of the financial statements of a firm; indicates the firm's financial
position at a specific point in time, that is, what the assets of the firm are worth (at book value) and how
they were financed by means of equity and debt financing
Cash flow statement - Correct Answer part of the financial statements of a f rm; indicates what cash
flows were generated from operating activities, from financing activities and from investment activities
Current assets - Correct Answer those assets that change with the transactions that take place as
business is conducted - inventory (stock), accounts receivable (debtors) and cash deposited or on
hand (In a trading business, inventory would be merchandise for resale; a manufacturing f rm would
hold an inventory of raw material, work-in-process and furnished goods.)
Director's report - Correct Answer an overview of the firm and its state of affairs for the benefit of the
users of the financial statements; deals with the firm's nature of business (including the
