FI 302
Market prices reflect information
Change of price led to stock price drop is an example of
The dividend rate
Characteristics of typical bonds include all of the following except
An index fund is is the fund with the highest expenses payable by investors
Each of the following is true of mutual funds except?
Time Value of Money
Foregoing the earning potential of a dollar today is referred to as the
$1000 today because it will be worth more now
If an investor had a choice of receiving $1000 today or $1000 in five years which would they prefer
Increase the market value of the firm's common stock
If managers are making decisions to maximize shareholder wealth then they are primarily concerned with making decisions that should
They are likely to lose their jobs
If managers do not pursue the goal of maximizing shareholder wealth
Cash Flow
In measuring value the focus should be on
Because they must hold large reserves to pay potential claims
Insurance companies have a great deal of money to invest because
Expected returns
Investors choose to invest in higher risk investments because these investments offer higher...
Market value of the stock goes up and when the stock pays a dividend
Investors in common stock increase their wealth when the
Time Value of Money
Investors prefer $1 today vs $1 in the future due to...
Because a business must be trusted by investors, customer and the public if it is to succeed
Managers of corporations need to act in an ethical manner
EBIT
On the income statement sales revenue minus cost of goods sold and operating expenses equals
It does not necessarily reflect shareholders wealth maximization It ignores the risk inherent in different projects that will generate the profits It ignores the timing of a project's returns
Profit maximization is not an adequate goal of the firm when making financial decisions because
Treasury Stock
Stock that is repurchased by the issuing company
False
T of F Insurance companies may only invest their reserves in interest paying bank accounts under Federal law
False
T of F Public Universities operate as financial intermediaries
The money market
The market for short-term debt is know as
Know as earnings management and is considered unethical
The practice of shifting income from good years to poor years in order to show a record of steady growth
Taxes
This is not included in operating income
The problem that results from potential conflicts of interest between the manager of a business and the stockholders
What does the agency problem refer to?
Balance Sheet
What does the company own and how is it financed?
Income Statement
Which of the basic financial statements is best used to answer the question how profitable is the business?
Earnings before interest and taxes
Which of the following best represents operating income?
Net profit after tax
Which of the following best represents the stream of income that is available to stockholders?
Common stock
Which of the following financial instruments entails the most risk and potentially the highest returns for investors?
Maximizing of the market value of the existing shareholder's common stock
Which of the following goals is in the best long term interest of stockholders?
Maximization of the total market value of the firm's common stock
Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?
Immediate response occurs for new public information
Which of the following is characteristic of an efficient market?
Dividends
Which of the following is not included in computing EBT
Debt with a maturity of less than one year
Which of the following is not traded in the capital markets?
They have a fixed maturity, and they pay an amount equal to the maturity value times the coupon rate each year
Which of the following is true about bonds?
Preferred dividends are not tax deductible to the corporation
Which of the following is true about preferred stock?
As of 2010, stand alone investment banks are numerous
Which of the following is true regarding Investment Banks?
Income Statement
Which of the following represents an attempt to measure the earnings of the firms operations over a given time period?
The study of how people and businesses make investment decisions and how to finance those decisions
Which of the following statements best represents what finance is about?
Operating Income
Which of the following streams of income is not affected by how a firm is financed
Common Stockholders
Who owns the retained earnings of a public firm?
Money received earlier can be reinvested and returns can be increased
Why do investors prefer receiving cash sooner rather than later?
Statement of Shareholder Equity
answers questions about changes in owner's equity that are not explained by the income statement
Capital Budgeting
area of finance that deals with long-term investment decisions is know as
Marketing managers, accounting staff, and MIS staff
finance managers need to interact constantly with
Investment Decision
from a financial viewpoint a company that decides to develop a new product is making a
Goal of the firm
maximization of the total market value of the firm's common stock
Investment
the personal decision to obtain a college degree in business is primarily a ______ decision
Cash Flow Statement
where did the money come from and how was it spent over the preceding year?
Management of cash flows
working capital management refers to