Chapter 14 Smartbook -- Finance

Select all that apply Internally generated funds are represented by which of the following? Choose any that apply. Multiple select question. Capital Expenditures Retained Earnings Depreciation Cashflow added back from depreciation

Retained Earnings Cashflow added back from depreciation

Which of the following events have contributed to the worldwide demand for capital? Multiple choice question. The rise of communism in Eastern Europe The reduction in telecommunication costs Trade protectionism The take over of private industry by government

The reduction in telecommunication costs

Security markets exist to aid the ________ of capital among households, corporations, and government.

allocation

Households funnel savings to intermediaries who invest them in the ________ markets.

capital

The U.S. Treasury's management of the federal government's debt is part of its _________ policy.

fiscal

The major supplier of funds for investment in the economy is typically the _______ sector.

household

Smaller companies choose to list on the NASDAQ instead of the NYSE because the listing requirements are Blank______. Multiple choice question. higher equal lower

lower

Investors benefit from liquid security markets because they can transform a _________ asset into _________ .

paper, cash

The NASDAQ Stock Market differs from the NYSE in that there is no ________ location and there are no designated ________ makers that are obligated to buy and sell securities.

physical, market

Efficient market hypothesis implies that outperforming the market requires choosing Blank______. Multiple choice question. intermediate stocks secondary stocks safe stocks risky stocks

risky stocks

The US Treasury _______ short-term securities when the government spends more money than it receives in tax revenue, and ________ short-term securities when it receives more tax revenue than it spends.

sells, buys

The US Treasury ________ short-term securities when the government spends more money than it receives in tax revenue, and ________ short-term securities when it receives more tax revenue than it spends.

sells, buys

Select all that apply The forms of the efficient market hypothesis are Blank______. Multiple select question. continuous semi-strong weak strong

semi-strong weak strong

Which of the following was a key component of the Sarbanes-Oxley act of 2002? Multiple choice question. It held corporate executives accountable for the accuracy of the company's financial statements. It gave more power to the SEC to regulate over the counter derivatives trading. It created the SEC to regulate exchanges and public companies. It create a national, largely electronic, trading venue.

It held corporate executives accountable for the accuracy of the company's financial statements.

Markets are generally said to be efficient if prices _________ rapidly to new information, there is a __________ market, and if the market can ________ large dollar amounts of trades without destabilizing prices.

adjust, continuous, absorb

Fannie Mae and Sallie Mae are the two largest federally sponsored credit agencies. True false question.

False

The Securities act of 1933 forced companies to provide full _________ of relevant information whenever a company sold a new issue of _________.

disclosure, securities

A primary variable that influences the market for securities is _________ ________.

interest rates

Securities laws strive to protect unwary __________ from _________ and manipulation.

investors, fraud

A market for a company's equity is called a capital market because equity is a ___________ term security.

long

Capital markets provide a place for firms to _______ capital and for individuals to __________ in promising business opportunities.

raise, invest

Select all that apply Internally generated funds are represented by which of the following? Multiple select question. Cash flow added back from depreciation Capital expenditures Retained earnings Depreciation

Cash flow added back from depreciation Retained earnings

Select all that apply Which of the following are typically net demanders of capital? Multiple select question. Corporations Households Government

Corporations Government

The NASDAQ Stock Market has more restrictive listing requirements than the NYSE. True false question.

False

The Sarbanes-Oxley Act of 2002 was introduced in response to the housing and banking crisis that occurred. True false question.

False

Select all that apply Choose all that apply: Preferred stock is usually issued by companies that have which of the following characteristics? Multiple select question. No long-term debt in their capital structure High earnings growth Low prices for their common stock A high debt to equity ratio

Low prices for their common stock A high debt to equity ratio

Select all that apply Identify the correct statements regarding preferred stock. Multiple select question. Preferred stock has preference as to dividends. Preferred stock is the least used of all long-term corporate securities. Corporation issues preferred stock as preferred dividend is tax-deductible. Preferred stock must be issued before any common stock is issued.

Preferred stock has preference as to dividends. Preferred stock is the least used of all long-term corporate securities.

Another name for the Securities Act of 1933 is the Truth-In-Securities Act True false question.

True

Corporate bond vs. common stock issuances make up the majority of external financing by corporations. True false question.

True

Technology has been a major factor in the growth of global capital markets because technology has Blank______. Multiple choice question. limited who can be involved in the markets decreased the costs of transactions decreased the volume of transactions increased the costs of doing business

decreased the costs of transactions

The Securities Exchange Act of 1934 empowered the Federal Reserve to regulate the securities markets. True false question.

False

Traditional exchanges have maintained their specialized status by avoiding affiliations with ECNs. True false question.

False

Select all that apply Security markets exist to allocate capital among which one of the following? Multiple select question. Government Financial institutions Households Corporations

Government Households Corporations

Where as US Treasury security has an ______ guarantee, federally sponsored agency debt has an _______ guarantee.

explicit, implicit

Technology companies often remain listed on the NASDAQ even as they grow larger, due to its rapid technological trading innovations. True false question.

True

The NYSE is the largest exchange in the US by dollar trading volume. True false question.

True

The Securities Exchange Act of 1934 created the Securities and Exchange Commission to enforce the securities laws. True false question.

True

True or false: Capital markets are a way of allocating capital to its most efficient user.

True

Which security is NOT traded in the money markets? Multiple choice question. Repurchase agreements Negotiable certificates of deposits Unsecured notes Commercial paper

Unsecured notes

Personal income that is saved and funneled to financial intermediaries is known as ________ investment.

indirect

Select all that apply Identify the correct statements regarding preferred stock. Multiple select question. Preferred stock must be issued before any common stock is issued. Corporation issues preferred stock as preferred dividend is tax-deductible. Preferred stock has preference as to dividends. Preferred stock is the least used of all long-term corporate securities.

Preferred stock has preference as to dividends. Preferred stock is the least used of all long-term corporate securities.

Capital markets are a mechanism for ________ available capital to the most _________ user.

allocating, efficient

ECNs have transformed security markets by Blank______. Multiple choice question. transforming public exchanges to private, member owned organizations automatically matching buy and sell orders at a lower cost increasing trading costs for investors

automatically matching buy and sell orders at a lower cost

Capital market securities include Blank______. Multiple choice question. working capital and common stock certificates of deposit and common stock bonds and commercial paper bonds and common stock

bonds and common stock

Securities law make the markets more competitive and _________ by forcing disclosure of relevant _________ _________.

efficient, investment information

Capital markets provide a place for Blank______. Multiple choice question. firms to invest capital and for individuals to raise capital. firms to raise capital only firms to raise capital and for individuals to invest capital. individuals to invest capital only

firms to raise capital and for individuals to invest capital.

Money markets deal with securities that Multiple choice question. have a life of one year or less are long-term have a life of one year or more have a perpetual life

have a life of one year or less

Markets are said to be efficient if prices reflect all publicly available __________ .

information

Variables that affect capital markets include Blank______. Multiple choice question. global crises only investors' confidence and economic growth only interest rates and investors' confidence only interest rates, investors' confidence, and economic growth

interest rates, investors' confidence, and economic growth

Corporations benefit from ________ security markets because they can raise funds rapidly at fair, competitive prices.

liquid

Corporations benefit from __________ security markets because they can raise funds rapidly at fair, competitive prices.

liquid

Different exchanges have _________ requirements that must be met before an equity can be ________.

listing, listed

Corporate bonds are generally classified as Blank______. Multiple choice question. current liabilities long-term debt fixed assets shareholders' equity

long-term debt