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AGEC 4040 EXAM 1 WITH COMPLETE
SOLUTIONS!!
finance - Answers the science and art of managing money financial services - Answers the area of finance concerned with the design and delivery of advice and financial products to individuals, businesses, and governments managerial finance - Answers concerned with the duties of the financial manager working in a business financial managers - Answers administer the financial affairs of all types of business sole proprietorship - Answers a business owned by one person and operated for his or her own profit partnership - Answers a business owned by two or more people and operated for profit
corporation - Answers an entity created by law; has the legal powers of an individual stakeholders - Answers groups such as employees, customers, suppliers, creditors, owners, and others who have a direct economic link to the firm business ethics - Answers the standards of conduct or moral judgement that apply to persons engaged in commerce marginal cost-benefit analysis - Answers the economic principle that states that financial decisions should be made and actions taken only when the added benefits exceed the added costs corporate governance - Answers the rules, processes, and laws by which companies are operated, controlled, and regulated individual investors - Answers investors who own relatively small quantities of shares so as to meet personal investment goals institutional investors - Answers investment professionals, such as banks, insurance companies, mutual funds, and pension funds, that are paid to manage and hold large quantities of securities on behalf of others Sarbanes-Oxley Act of 2002 - Answers - established an oversight board to monitor the accounting industry
- tightened audit regulations and controls
intermediaries - Answers channel the savings of individuals, businesses, and governments into loans or investments commercial banks - Answers institutions that provide savers with a secure place to invest their funds and offer loans to individuals and business borrowers investment banks - Answers institutions that assist companies in raising capital, advise firms on major transactions such as mergers or financial restructurings, and engage in trading and market making activities Glass-Steagall Act - Answers an act of Congress in 1933 that created the federal deposit insurance program and separated the activities of commercial and investment banks; repealed in 1999 by Congress shadow banking system - Answers a group of institutions that engage in lending activities, much like traditional banks, but do not accept deposits, and are not subject to the same regulations as traditional banks financial markets - Answers forums in which suppliers of funds and demanders of funds can transact business directly private placement - Answers involves the sale of a new security directly to an investor or group of investors public offering of securities - Answers the sale of either bonds or stocks to the general public
primary market - Answers the financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transaction secondary markets - Answers financial markets in which preowned (those that are not new issues) are traded money market - Answers created by a financial relationship between suppliers and demanders of short-term funds marketable securities - Answers short-term debt instruments, such as:
- U.S. Treasury bills issued by the federal government
- commercial paper issued by businesses
- negotiable certificates of deposit issued by financial institutions Eurocurrency market - Answers a market for short-term bank deposits denominated in U.S. dollars or other marketable currencies; the international equivalent of the domestic (U.S.) money market broker markets - Answers securities exchanges on which the two sides of a transaction, the buyer and seller, are brought together to trade securities
international equity market - Answers allows corporations to sell blocks of shares to investors in a number of different countries simultaneously efficient market - Answers allocates funds to their most productive uses as a result of competition among wealth-maximizing investors and determines and publicizes prices that are believed to be close to their true value behavioral finance - Answers an emerging field that blends ideas from finance and psychology, argue that stock prices of other securities can deviate from their true values for extended periods securitization - Answers the process of pooling mortgages or other types of loans then selling claims or securities against that pool in a secondary market mortgage-backed securities - Answers represent claims on the cash flows generated by a pool of mortgages and can be purchased by individual investors, pension funds, or virtually any other investor the Federal Deposit Insurance Corporation (FDIC) - Answers provides insurance for deposits at banks and monitors banks to ensure their safety and soundness Gramm-Leach-Bliley Act (1999) - Answers allows business combinations (e.g. mergers) between commercial banks, investment
banks, and insurance companies, and thus permits these institutions to compete in markets that prior regulations prohibited them from entering Securities Act of 1933 - Answers regulates the sale of securities to the public via the primary market Securities Exchange Act of 1934 - Answers regulates the trading of securities such as stocks and bonds in the secondary market Securities Exchange Commission - Answers the primary government agency responsible for enforcing federal securities laws marginal tax rate - Answers represents the rate at which additional income is taxed average tax rate - Answers the firm's taxes divided by taxable income double taxation - Answers occurs when after-tax corporate earnings are distributed as cash dividends to stockholders, who then must pay personal taxes on the dividend amount capital gain - Answers the amount by which the sale price of an asset exceeds the asset's purchase price
statement of cash flows - Answers provides a summary of the firm's operating, investment, and financing cash flows and reconciles them with changes in its cash and marketable securities during the period; also ties together the income statement and previous and current balance sheets FASB 52 - Answers mandates that U.S.-based companies translate their foreign-currency-denominated assets and liabilities into dollars, for consolidation with the parent company's financial statements current rate (translation) method - Answers a technique used by U.S.-based companies to translate their foreign currency denominated assets and liabilities into dollars, for consolidation with the parent company's financial statements, using the year-end (current) exchange rate equity accounts - Answers translated into dollars by using the exchange rate that prevailed when the parent's equity investment was made (the historical rate) retained earnings - Answers adjusted to reflect each year's operating profits (or losses) ratio analysis - Answers involves methods of calculating and interpreting financial ratios to analyze and monitor the firm's performance current and prospective shareholders - Answers are interested in the firm's current and future level of risk and return, which directly affect share price
creditors - Answers are interested in the short-term liquidity of the company and its ability to make interest and principal payments management - Answers is concerned with all aspects of the firm's financial situation, and it attempts to produce financial ratios that will be considered favorable by both owners and creditors cross-sectional analysis - Answers the comparison of different firms' financial ratios at the same point in time; involves comparing the firm's ratios to those of other firms in its industry or to industry averages benchmarking - Answers a type of cross-sectional analysis in which the firm's ratio values are compared to those of a key competitor or group of competitors that it wishes to emulate time-series analysis - Answers the evaluation of the firm's financial performance over time using financial ratio analysis earnings per share - Answers represents the number of dollars earned during the period on the behalf of each outstanding share of common stock return on total assets - Answers measures the overall effectiveness of management in generating profits with its available assets return on equity - Answers measures the return earned on common stockholders' investment in the firm
financial planning process - Answers begins with long-term, or strategic, financial plans that in turn guide the formulation of short-term, or operating, plans and budgets two key aspects of financial planning - Answers 1. cash planning
- profit planning cash planning - Answers involves the preparation of the firm's cash budget profit planning - Answers involves preparation of pro forma statements Finance can be defined as... - Answers ...the art and science of managing money. The primary goal of the financial manager is... - Answers ...maximizing wealth. The key role of the financial manager is... - Answers ...decision making. The conflict between the goals of a firm's owners and the goals of its non- owner managers is... - Answers ...the agency problem.
When home prices are falling we would expect __________ mortgage default rates. - Answers high A ____________________ probability distribution shows all possible outcomes and associated probabilities for a given event. - Answers continuous A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is... - Answers $ A behavioral approach that evaluates the impact on the firm's return of simultaneous changes in a number of project variables is called... - Answers scenario analysis In the context of capital budgeting, risk generally refers to... - Answers ...the degree of variability of the cash inflows. In comparing the internal rate of return and net present value methods of evaluation... - Answers ...net present value is theoretically superior, but financial managers prefer to use internal rate of return. The cost of capital reflects the cost of funds... - Answers ...over a long-run time period. The Farm Credit System is a type of _________________. - Answers cooperative
