FINA DMS CH. 1, 2

Any bond issued by a government or firm that is denominated in the issuer's home currency but sold in other countries is known as a __________.

Eurobond

One all-electronic market used to trade stocks via a linked computer network is the __________.

NASDAQ

__________ trade in the money market.

U.S. Treasury bills

Which of the following is one of the primary questions addressed by financial managers?

Which project should the firm invest resources in to increase shareholders wealth?

A limited liability company combines the

limited liability of a corporation with the ownership of a partnership

Which of the following is one of the primary functions of the financial manager?

making financing decisions

Financial managers should undertake investment opportunities when the __________.

marginal benefit is greater than the marginal cost

The fraction of the next dollar of income that you will pay in taxes is referred to as the __________.

marginal tax rate

In finance, we often assume that the current price of an asset reflects everything we know about that asset. This theory is known as:

market efficiency

The primary goal of the financial manager is to:

maximize shareholder wealth

Capital structure refers to the:

mix of the firm's long-term sources of financing

The market where short-term funds are supplied and demanded is known as the __________.

money market

Income that is earned through the sale of a firm's goods and/or services is known as __________.

ordinary income

The New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) are both known as:

organized security exchanges

The market where small unlisted securities are traded is known as the __________.

over-the-counter market

The market where financial securities are offered for sale to the public for the very first time is known as the __________.

primary market

The market where financial securities are offered for sale to the public for the very first time is known as the:

primary market

The Federal Deposit Insurance Corporation (FDIC) was created in 1933 to __________.

provide insurance on bank deposits

One of the most important functions of the secondary market is to:

provide liquidity to investors

When a manager makes a poor decision that is not in the shareholders' best interest it will be:

reflected in the stock price

A(n) __________ is the process by which a public firm issues new shares.

seasoned equity offering

Financial managers __________ when making decisions because it can have a direct impact on shareholder wealth.

should always engage in ethical behavior

Mortgage loans made to higher-risk borrowers with poor credit histories are known as __________.

subprime mortgages

The Securities Act of 1933 deals primarily with:

the sales of new securities

A(n) __________ designs the structure of the IPO, markets the IPO, and assists with the necessary filings for an IPO.

underwriter

A disadvantage of a partnership is __________.

unlimited liability

One of the primary tasks of the financial manager is to manage short-term cash needs, which is known as:

working capital management

If a firm pays $230,200 in taxes on $1,110,000 in income that firm's average tax rate is __________.

20.7% $230,220/$1,110,000 = .207 or 20.7%

The U.S. Congress passed legislation in 2002 that holds corporate managers personally responsible for the firm's financial disclosures and decisions. This law is known as the __________.

Sarbanes-Oxley Act

The Securities Exchange Act of 1934 created the:

Securities Exchange Commission (SEC).

One of the most fundamental principles in the field of finance is that money has __________ value.

a time

If the managers of a company are not the owners of the company, they are considered:

agents

When a firm has agency problems the stock price is often depressed which makes the firm:

an attractive takeover candidate

When a firm issues shares of stock to the public for the very first time, it is known as:

an initial public offering

The __________ price is the highest price that a market maker offers to pay for a security and the __________ price is the lowest price at which a security is offered for sale.

bid; ask

The process of evaluating long-term investment opportunities for the firm, and then determining which ones the firm should invest in is known as:

capital budgeting

Financial managers are more concerned with a firm's __________ than a firm's earnings per share when evaluating a potential acquisition.

cash flows

Financial institutions include:

commercial banks

A firm's chief accountant that is responsible for all accounting activities is known as the __________.

controller

Which of the following positions typically reports to the chief financial officer (CFO)?

controller

The set of rules, processes and laws that dictate how a firm is controlled, operated and regulated is known as __________.

corporate governance

A __________ is a form of business organization that is considered an artificial being and has limited liability.

corporation

U.S. stock trades made using information not available to the general investing public are known as __________.

insider trades

The market price of a share of stock is determined by:

investors buying and selling the stock

Which of the following is an example of an agency cost?

executive stock options

The science and art of managing money is known as __________.

finance

The manager responsible for monitoring and managing the firm's exposure to loss from currency fluctuations is the:

foreign exchange manager

A multinational firm that receives payment in Japanese yen can convert the yen to U.S. dollars on the:

foreign exchange market

One of the basic premises in finance is that when the risk of an investment is high, the rate of return required by the investor will be:

high