Finance 301 Exam 1 UNR THOMAS
questions with complete solutions
Goals of Finance - correct answer ✔✔Maximize the wealth of business owners (shareholders) by
maximizing the value of shares
5 C's of Credit - correct answer ✔✔-Capacity: ability to pay (repay)
-Collateral: something of value to pledge
-Capital: net worth
-Conditions: unemployment rates (e.g.) (least control)
-Character: likelihood of re-paying
-These combine to measure "default risk" and determine if loans will be made and at with interest rat
U= use... - correct answer ✔✔Increase in assets
decrease in L+SE
Finacial Planning - correct answer ✔✔The process of setting, spending priotites, and defining goals and
developing a plan to achieve them, and them putting a plan into action
Possible Scenarios
-Pro forma assests = proforma & equity
-Pro forma assets > pro forma L& equity
-Pro forma assets< pro forma liability & equity - correct answer ✔✔-unlikely
-most likely
-much less likely, but great when it happens (spending plan)
S=Sources - correct answer ✔✔Decrease in assets
,Increase in L+SE
great depression caused what regulation??? - correct answer ✔✔- Glass-Steagall
-Securities exchange act
-Congress passes the Dodd-Frank Act in 2010
Financial Intermediaries - correct answer ✔✔-collect money from many individuals, pool it, and then
make investments with these pools of funds
-Banks, insurance companies, pension funds, etc.
The financial instruments(securities) purchased are held by the financial intermediary
The fin'l intermediary gives individual investors a security (claim) of its own
Three areas of Finance - correct answer ✔✔Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance - correct answer ✔✔The activities involved in managing money in a business
environment.
institutions and markets - correct 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 - correct answer ✔✔focuses on the valuation techniques and how to value alternative
investment opportunities that are provided primarily through financial markets and institutions
Capital Markets - correct answer ✔✔financial markets where issuers and investors buy and sell debt and
equity securities
Companies Raise capital through... - correct answer ✔✔selling debt instruments
selling stocks/ equity instruments
, Debt - correct answer ✔✔obligation to repay borrowed money
Stock - correct answer ✔✔represents ownership in the company
Effect of Technology - correct 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... - correct answer ✔✔debt, equity, currencies, commodities, and other financial assets.
Economic health - correct answer ✔✔Gov
-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
Downside of free flow of capital - correct 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 - correct answer ✔✔The investment decision
The Financing decision
The dividend decision
questions with complete solutions
Goals of Finance - correct answer ✔✔Maximize the wealth of business owners (shareholders) by
maximizing the value of shares
5 C's of Credit - correct answer ✔✔-Capacity: ability to pay (repay)
-Collateral: something of value to pledge
-Capital: net worth
-Conditions: unemployment rates (e.g.) (least control)
-Character: likelihood of re-paying
-These combine to measure "default risk" and determine if loans will be made and at with interest rat
U= use... - correct answer ✔✔Increase in assets
decrease in L+SE
Finacial Planning - correct answer ✔✔The process of setting, spending priotites, and defining goals and
developing a plan to achieve them, and them putting a plan into action
Possible Scenarios
-Pro forma assests = proforma & equity
-Pro forma assets > pro forma L& equity
-Pro forma assets< pro forma liability & equity - correct answer ✔✔-unlikely
-most likely
-much less likely, but great when it happens (spending plan)
S=Sources - correct answer ✔✔Decrease in assets
,Increase in L+SE
great depression caused what regulation??? - correct answer ✔✔- Glass-Steagall
-Securities exchange act
-Congress passes the Dodd-Frank Act in 2010
Financial Intermediaries - correct answer ✔✔-collect money from many individuals, pool it, and then
make investments with these pools of funds
-Banks, insurance companies, pension funds, etc.
The financial instruments(securities) purchased are held by the financial intermediary
The fin'l intermediary gives individual investors a security (claim) of its own
Three areas of Finance - correct answer ✔✔Corporate Finance- businesses
Institutions and Markets- financial markets
Investments- investors
corporate finance - correct answer ✔✔The activities involved in managing money in a business
environment.
institutions and markets - correct 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 - correct answer ✔✔focuses on the valuation techniques and how to value alternative
investment opportunities that are provided primarily through financial markets and institutions
Capital Markets - correct answer ✔✔financial markets where issuers and investors buy and sell debt and
equity securities
Companies Raise capital through... - correct answer ✔✔selling debt instruments
selling stocks/ equity instruments
, Debt - correct answer ✔✔obligation to repay borrowed money
Stock - correct answer ✔✔represents ownership in the company
Effect of Technology - correct 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... - correct answer ✔✔debt, equity, currencies, commodities, and other financial assets.
Economic health - correct answer ✔✔Gov
-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
Downside of free flow of capital - correct 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 - correct answer ✔✔The investment decision
The Financing decision
The dividend decision
