Finance

debt financing

From the borrower's perspective, debt has a fixed cost, the interest rate, but it represents a significant potential threat to the company's existence. If interest and principal are not paid as agreed, lenders can foreclose, possibly requiring the business to cease operations and liquidate its assets.

financial intermediation

institutions accept savers deposits and invest them in financial products (such as loans) that are expected to produce a return

The Fed

the central bank of the US

open market operations

the purchase and sale of U.S. government bonds by the Fed

_____ are profit-oriented depository financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services. Commercial banks Thrift institutions Finance companies Credit unions Investment banks

Commercial banks

equity financing

Equity financing involves selling a portion of a company's equity in return for capital Issuing equity results in sharing future profits with investors but is less threatening to the future of the business if profitability becomes impaired. Equity investments produce varying levels of return depending on the profitability of the issuer over time.

Money

Any item that is generally acceptable to sellers in exchange for goods and services.

The primary goal of the financial manager is to: -maximize the value of the firm to its owners -concentrate on short-term growth strategies -develop new goods and services for the company -make sure all employees get paid on a regular schedule -pay off all debt as quickly as possible

-maximize the value of the firm to its owners

Characteristics of money

portability, durability, divisibility, limited availability

The most important function of the Federal Reserve System is carrying out ______ policy. fiscal tax monetary spending inflationary

monetary

The three principal tools of the Federal Reserve System are: discount rate, prime rate, and open market operations tax rate, margin requirements, and discount rate open market operations, discount rate, and tax rate reserve requirements, consumer rate, and prime rate reserve requirements, discount rate, and open market operations

reserve requirements, discount rate, and open market operations

Financial institutions act as intermediaries between suppliers and demanders of funds. They accept savers' deposits and invest them in such things as business loans or mortgages. This process is called: financial intermediation financial coordination financial equilibrium depository intermediaries intermediary banking

financial intermediation