Finance

What are the 4 areas of finance?

1. Financial Institutions 2. International Finance 3. Corporate Finance 4. Investments

Which of the following can lead to increased expected cash flow over time to the​ firm? A. Open and collaborative relations with the community B. Greater customer satisfaction C. Qualified and motivated employees D. All of the above

D

Which of the following is NOT a capital structure​ question? A. A delivery company chooses to buy more trucks. B. A retail firm chooses to use a new supplier. C. A manufacturing firm chooses to take the discount for paying accounts payable early. D. None of the above are capital structure questions.

D

Which of the following is NOT an activity of working capital​ management? A. Establishing the​ firm's payment policies B. Choosing the appropriate level of inventory C. Establishing the​ firm's receivable policies D. All of the above are working capital management activities.

D

Which of the following is NOT an example of a financial​ transaction? A. Your roommate lends you​ $20 and you repay it in one week. B. Your parents use their credit card to pay this​ term's college tuition. C. You use the ATM to withdraw British pounds so you can fly to London. D. All of the above are financial transactions.

D

You wish to make a substantial down payment on a lake cottage and you currently have​ $18,325 invested at an annual rate of​ 4.75%. How much money will be in the account in 2.5 years if it continues to earn at its present​ rate? A. $18,325 B. ​$19,464 C. ​$20,605 D. $20,579

D

________ is simply the interest earned in subsequent periods on the interest earned in prior periods. A. Anticipated interest B. Simple interest C. Quoted interest D. Compound interest

D

What markets are stocks bought and sold in?

Equity

The sale of​ "used" securities, where the financial asset is being traded from one individual to another and the proceeds do not go to the original issuer of the​ security, is said to take place in the​ ________ market.

Secondary

What are investments?

the activities around the buying and selling of financial assets. A typical activity is the selling of a bond issue such as a school bond for building a new school.

What is international finance?

the financial activities performed in foreign countries for a domestic company. A typical financial activity is the changing of the currency of one country into the currency of another country.

What is Corporate Finance?

the financial activities that support the operations of a business. A typical financial activity in this area is borrowing funds to support a plant expansion or supplementing short term cash needs.

What are financial institutions?

the organizations that promote and facilitate the cycle of money. A typical financial activity is offering checking and savings accounts as well as selling securities such as certificates of​ deposit, stocks and bonds.

In agency​ theory, the owners of the business are referred to as​ ________, and the managers are referred to as​ ________. A. principals, agents B. stockholders, bondholders C. ​bondholders, principals D. agents, principals

A

Of the following which group would be considered EXTERNAL PLAYERS of the​ firm? A. The loan officer at the​ firm's commercial bank B. The shop foreman C. The human resources manager D. All of the above

A

Which of the following actions will INCREASE the present value of an​ investment? A. Decrease the interest rate. B. Increase the amount of time. C. Decrease the future value. D. All of the above will increase the present value.

A

You plan to place a​ $40,000 down payment on a lake cabin in Northern Minnesota in five years. If you invest in a long−term CD earning an annual rate of​ 5.50%, how much would you need to invest today to have enough for the down payment in five​ years? A. $30,605 B. $18,264 C. $33,326 D. $24,379

A

________ is a major disadvantage of the corporate form of business. A. Double taxation B. Unlimited liability C. Transfer of ownership D. Lack of ability to raise capital

A

________ is the area of business that deals with how a company conducts its business and implements controls to ensure proper procedures and ethical behavior. A. Corporate Governance B. Agency Relationship C. Leadership D. None of the above

A

An investment of​ $100 today is worth​ $116.64 at the end of two years if it earns an annual interest rate of​ 8%. How much interest is earned in the first year and how much in the second year of this​ investment? A. The interest earned in year one is​ $8.32 and the interest earned in year two is​ $8.32. B. The interest earned in year one is​ $8.00 and the interest earned in year two is​ $8.64. C. The interest earned in year one is​ $8.64 and the interest earned in year two is​ $8.00. D. There is not enough information to solve this problem.

B

Gasoline cost​ $.10 per gallon in 1930. Over the next 60​ years, the price rose at an average rate of​ 4.42% per year. Based on this​ information, what was the average price of a gallon of gas in​ 1990? A. $2.75 per gallon B. ​$1.34 per gallon C. $1.53 per gallon D. $2.65 per gallon

B

You can invest your money at a rate of​ 7% per year. At this rate it will take you just over​ ________ years to double your money. Use the Rule of 72 to determine your answer. A. 5.5 B. 10 C. 4 D. There is not enough information to answer this question.

B

A​ $100 deposit today that earns an annual interest rate of​ 10% is worth how much at the end of two​ years? Assume all interest received at the end of the first year is reinvested the second year. A. $100 B. ​$120 C. $122 D. $121

D

Of the​ following, which is NOT an example of a financial​ intermediary? A. Investment bank B. Commercial bank C. Insurance company D. All of the above are financial intermediaries

D

A​ ________ has limited​ liability, is a legal​ entity, and has the greatest potential to raise capital. A. limited partnership B. sole proprietorship C. corporation D. general partnership

C

A​ ________ is a business that is owned entirely by an individual. A. subminus−chapter s corporation B. corporation C. sole proprietorship D. partnership

C

In your first year out of college you hope to earn​ $60,000 per year. How many years will you have to work until you earn​ $120,000 if your income increases at a rate of​ 10% per​ year? Use the Rule of 72 to determine your answer. A. You would need to work for just over 5 years to reach an income level of​ $100,000 per year. B. You would need to work for just over 8 years to reach an income level of​ $100,000 per year. C. You would need to work for just over 7 years to reach an income level of​ $100,000 per year. D. You would need to work for just over 6 years to reach an income level of​ $100,000 per year.

C

The problem of motivating one party to act in the best interest of another party is known as the​ ________. A. sigma six structure B. management priority C. principal − agent problem D. leadership directive

C

Which of the following is NOT an example of an equity market​ transaction? A. Mary sells her shares of Apple stock. B. Sahid buys shares of a small company stock traded on the NASDAQ. C. Mark contacts his broker and requests a purchase of IBM bonds. D.All of the above are equity market transactions

C

Of the​ following, which is NOT one of the four main areas of​ finance? A. Corporate finance B. Investments C.International finance D.All are considered main areas of finance

D

​________ is the typical title of the corporate executive charged with determining the best repayment structure for borrowed funds to ensure timely repayment and sufficient cash for daily operations.

CFO (Chief Financial Officer)

A company that chooses a new product to introduce into the market is a _______ decision?

Capital Budeting Decision

A company that chooses to sell a bond to finance the new product is a ______ decision?

Capital Structure Decision

The oneminus−time payment of money at a future date is often called a​ ________. A. principal amount B. perpetuity payment C. present value D. lump − sum payment

D

What markets are currencies bought and sold in?

Foreign Exchange

Financial assets that will mature within a year are bought and sold in the​ ________ market.

Money

The sale of​ "new" securities, where the financial asset is being traded for the very first​ time, is said to take place in the​ ________ market.

Primary

The movement of money from lender to borrower and back again is known as​ ________.

The cycle of money

A company that sets production and inventory levels on the new product is a ______ decision?

Working Capital Management