BUS101 Unit 8

Money is used as:

All of the above.

Durability and simplicity are two important characteristics of money.

False

In finance, the potential for loss is called probability.

False

Lines of credit are short-term loans that are secured by collateral.

False

Sales made, but for which payment has not yet been collected, are called accounts payable.

False

Selling a firm's accounts receivables to a financial institution at a discount is called countertrading.

False

The prime rate is the interest rate that the Federal Reserve charges member banks for loans.

False

The three tools used by the Federal Reserve to manage monetary policy are reserve requirements, the prime rate, and the discount rate.

False

Trade credit is credit extended to the buyer by the seller. It is entered in the buyer's books as an account receivable.

False

Treasury bills, certificates of deposit, and mortgage loans are the most popular marketable securities.

False

_____ management is the art and science used to determine the most effective ways to acquire and use funds to achieve the firm's goals.

Financial

______ is anything (regardless of form) that is acceptable as payment for goods and services.

Money

Accounts receivable or inventory usually secures short-term secured loans.

True

Another term for a checking account is a time deposit.

True

By lowering the reserve requirement, the Federal Reserve tries to make more money available for loans and stimulate the economy.

True

Depository financial institutions include commercial banks, thrift institutions, and credit unions.

True

Examples of time deposits are savings accounts, money market deposit accounts, and certificates of deposit.

True

Financial management is the art and science of managing a firm's money so the firm can meet its goals.

True

In finance, the opportunity for a profit is called return.

True

Margin requirements tell the minimum amount of cash an investor must put up when borrowing from a bank or brokerage firm to purchase stock.

True

Money is anything that is acceptable as payment for goods and services.

True

National banks must belong to the Federal Reserve System and must carry FDIC insurance.

True

The benefits from capital expenditures extend beyond one year's time.

True

Financial managers:

are described by none of the above

Financial managers focus on _____, the inflow and outflow of cash.

cash flows

The _____ characteristic of money is revealed by the fact that a dollar can be converted into four quarters or ten times.

divisibility

Cupcakes, hamburgers, and cut flowers would not make good mediums of exchange because they lack the key characteristic of:

durability

Keisha Hunter keeps track of day-to-day operational data to make sure her employer has enough cash to run the business and will determine if and when the company she works for should open a second distribution center. Hunter is a(n) _____ manager.

financial

Making sure that enough cash is on hand to pay bills as they come due and to meet unexpected expenses is called cash:

management

The primary goal of the financial manager is to:

maximize the value of the firm to its owners

Any object or objects that a group of people use to buy and sell goods and services is called:

money

Boulders, building trusses, and lead ingots would not make good mediums of exchange because they lack the key characteristic of:

portability

Which of the following is not one of the key characteristics required in order for money to be an acceptable medium of exchange?

profitability

In finance, the opportunity for profit is called:

return

In finance, _____ is the potential for loss.

risk

In seeking a balance between the opportunity for profit and the potential for loss, a financial manager is dealing with the concept of _____ trade-off.

risk-return

Items that groups of people use as money must be _____ to be acceptable mediums of exchange.

scarce, divisible, portable, and durable

Weeds, sand, and paper clips would not make good mediums of exchange because they lack the key characteristic of:

scarcity

Ruth Hu recently inherited $200,000. She has invested the inherited money in real estate and government securities. Hu is using her money as a:

store of value

Financial managers constantly strive for a balance between:

the opportunity for profit and the potential for loss