Finance Chapter 1

What role does a financial institution play in a financial system?

Financial institutions must distribute capital in an efficient manner

Which two groups participate in financial markets

People with money but no ideas and people with ideas but no money

T or F: Managerial finance helps managers make decisions related to cash management, capital investments, and risk reduction

True

T or F: Money that forms either retain or pay to the government are sources of friction that reduce cash flows to investors in the financial markets

True

Which of these best illustrates how funds flow in a financial system?

an individual invests in bank savings account and the bank lends money to companies

capital is exchanged by the mechanisms within the ___________ markets.

financial

Which one of these is NOT a sub-area?

financial assets

financial management relates to which one of the following

financial management related to a firm's decisions regarding the acquisition and use of funds

Which one of the following statements correctly identifies a group that supplies money to the financial markets?

individuals saving for retirement

financial institutions contribute to the dynamics of which of the following rates

interest rates

Which of these correctly defines a role of investments?

investments address the timing of cash flows most desired by investors

which group has individual investors as participants and is a lender of funds to the financial markets?

people with money and no ideas lend funds to the financial markets

What are two primary sources of friction that decreases cash flows from companies to their investors?

retained earnings and taxes