Financial Management
Which of the following statements best describes a marginal investor?
A. A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change.
B. A marginal investor thinks that the firm’s stock at the current price is a good deal, and she would buy more stock if she had more money to invest.
C. A marginal investor thinks that the firm’s stock is priced too high, and she would only buy more stock if the price dropped sharply.
A. A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change.
Joshua recently purchased 100 shares of an innovative technology company that is going public. What type of transaction is this?
A. Primary Market
B. Money Market
C. Direct Transfer
A. Primary Market
They accept deposits from savers and make loans to people who need it. They provide various services, such as checking accounts and money market transactions, to facilitate capital exchange between savers and people who need it.
Commercial bank
Has three segments that when analyzed together give an idea of what the company owns and what it owes.
Balance Sheet
Ratios that help assess a company’s ability to service the interest and repayment obligations on its long-term debt and the degree to which it uses borrowed versus invested financial capital are called
Debt Management Ratios
Imagine that a firm's board of directors wants to maximize value for all of its stockholders in general, as opposed to some specific stockholders. A smart solution would be to design an executive compensation system that aims to build the firm's long-term value.
TRUE OR FALSE
TRUE
c. The market capitalization of NASDAQ-traded stocks is higher than NYSE-traded stocks.
TRUE OR FALSE
False
These are financial intermediaries that share the financial risk of the untimely demise of their policyholders, who make regular payments to financial intermediaries for taking this risk
Life insurance companies
Accounts for all revenues and expenses over an accounting period.
Income Statement
Ratios that help measure a company’s ability to generate income and profits based on its invested capital.
Profitability Ratios
Caesar, the CEO of a beverage company, is required to certify the accuracy of information provided in the company’s quarterly reports.
Which type of business organization is being described?
corporation
Citibank issues a loan to Jennifer for the expansion of her flower delivery business.
Which type of capital allocation process is being described?
A. Direct transfer
B. Indirect Transfers through Investment Banks
C. Indirect Transfers through Financial Intermediaries
C. Indirect Transfers through Financial Intermediaries
These financial conglomerates provide a range of services, such as investment banking, commercial banking, and financial advising.
Financial service corporations
Which financial statement would be most helpful in answering the question, "How much cash is a firm generating through operating, investing, and financing activities?"
Statement of Cash Flow
Ratios that examine the market value of a company’s share price, its profits and cash dividends, and the book value of the firm’s assets and relate them to other data items to determine how the firm is perceived in the stock market.
Market Value Ratios
Purple Consulting has five consultants in the firm. The company’s annual revenue is around $500,000. Income is distributed among all consultants, and each is personally liable for claims if the company goes under.
Which type of business organization is being described?
Partnership
Which of the following types of funds is largely unregulated?
A. Exchange-traded funds
B. Hedge Funds
C. Money Market Funds
B. Hedge Funds
These are organizations that invest in equity capital that is not traded in public exchanges.
Private equity companies
Investors are best able to forecast future earnings and dividends for a company using information contained in which financial statement and reports.
Annual Report
These ratios help determine how efficiently a firm is using its assets to generate sales are called
Asset Management Ratios
What are TWO departments that CFO's are responsible for?
Legal, Credit, Security analyst relations
Entrepreneurs often start businesses by seeking financial help from family and friends.
Which type of capital allocation process is being described?
A. Direct transfer
B. Indirect Transfers through Investment Banks
C. Indirect Transfers through Financial Intermediaries
A. Direct transfer
They are established by an employer to facilitate and organize employee retirement funds. They are asset pools that invest in securities that have a potential to give stable returns.
Pension funds
An important component of operating costs is
a. depreciation and amortization.
b. earnings per share.
c. earnings before interest and taxes.
a. depreciation and amortization.
A _________ days of sales outstanding represents an efficient credit and collection policy.
A. High
B. Low
B. Low