IET 414 - Final Exam questions well
answered
What should managers know about risk? - correct answer ✔✔ Extension for high-risk borrowers
Creation/sale of mortgage-backed securities
Losses from credit defaults in excess of banks' capital in many cases
Social Responsibility - correct answer ✔✔ Adopting policies that maximize values in market
How does the internet affect markets - correct answer ✔✔ •Internet accelerates e-commerce
solutions for "old economy" companies
•E-commerce solutions for existing companies
Creation of new business models and companies
•E-commerce affects pattern and speed with which cash flows through firms
Restructuring a corporation - correct answer ✔✔ •Changes in capital structure (liabilities and
equity on balance sheet)•Sale of low-profit-margin divisions with proceeds from sale reinvested
in better investment opportunities•Removal of current management team or large reductions
in workforce
Insider trading - correct answer ✔✔ Using information not available to public, making undue
profit from trading in company's publicly traded securities
•Unethical and illegal practice protected against by Securities Exchange Commission (SEC)
•Has a negative impact on shareholder's interest
Agency Theory - correct answer ✔✔ Examines the relationship between owners and managers
of the firm
, Identify and reduce potential conflicts of interest
Different types of ownership - correct answer ✔✔ Sole Proprietorship, Partnership, and
Corporation
Risk-return trade-off - correct answer ✔✔ potential return rises with an increase in risk
The primary goal of financial management - correct answer ✔✔ maximization of profit
Operating income on an income statement - correct answer ✔✔ Gross Profit - expenses -
depreciation = OP
calculate earnings per share - correct answer ✔✔ net income - preferred dividends / weighted
average common shares outstanding
Calculate taxes - correct answer ✔✔ EBT - Tax rate
Par value in Common - correct answer ✔✔ total number of common stock / preferred stock
Retained earnings - correct answer ✔✔ An amount earned by a corporation and not yet
distributed to stockholders.
Price Earnings Ratio - correct answer ✔✔ The multiplier applied to earnings per share to
determine current value.
Fixed vs current assets - correct answer ✔✔ long-term assets (plant and equipment)
short-term assets (held for under a year; supplies or cash)
answered
What should managers know about risk? - correct answer ✔✔ Extension for high-risk borrowers
Creation/sale of mortgage-backed securities
Losses from credit defaults in excess of banks' capital in many cases
Social Responsibility - correct answer ✔✔ Adopting policies that maximize values in market
How does the internet affect markets - correct answer ✔✔ •Internet accelerates e-commerce
solutions for "old economy" companies
•E-commerce solutions for existing companies
Creation of new business models and companies
•E-commerce affects pattern and speed with which cash flows through firms
Restructuring a corporation - correct answer ✔✔ •Changes in capital structure (liabilities and
equity on balance sheet)•Sale of low-profit-margin divisions with proceeds from sale reinvested
in better investment opportunities•Removal of current management team or large reductions
in workforce
Insider trading - correct answer ✔✔ Using information not available to public, making undue
profit from trading in company's publicly traded securities
•Unethical and illegal practice protected against by Securities Exchange Commission (SEC)
•Has a negative impact on shareholder's interest
Agency Theory - correct answer ✔✔ Examines the relationship between owners and managers
of the firm
, Identify and reduce potential conflicts of interest
Different types of ownership - correct answer ✔✔ Sole Proprietorship, Partnership, and
Corporation
Risk-return trade-off - correct answer ✔✔ potential return rises with an increase in risk
The primary goal of financial management - correct answer ✔✔ maximization of profit
Operating income on an income statement - correct answer ✔✔ Gross Profit - expenses -
depreciation = OP
calculate earnings per share - correct answer ✔✔ net income - preferred dividends / weighted
average common shares outstanding
Calculate taxes - correct answer ✔✔ EBT - Tax rate
Par value in Common - correct answer ✔✔ total number of common stock / preferred stock
Retained earnings - correct answer ✔✔ An amount earned by a corporation and not yet
distributed to stockholders.
Price Earnings Ratio - correct answer ✔✔ The multiplier applied to earnings per share to
determine current value.
Fixed vs current assets - correct answer ✔✔ long-term assets (plant and equipment)
short-term assets (held for under a year; supplies or cash)
