F100 Final
Merrill Lynch's early strategy focused on... becoming the premier investment bank on the west coast. innovating with mortgage backed securities. focusing on debt issues instead of equity issues. Correct! "bringing Wall Street to Main Street."
"bringing Wall Street to Main Street."
Although hedge funds often used debt to leverage their investments and increase the ROI to equity holders, before it failed, Long-Term Capital Management at one time had an unusually high debt-to-equity ratio of... 100 to 1. Correct! 250 to 1. 50 to 1. 35 to 1.
250 to 1.
In our discussion of the Timken case (where they purchased the Torrington company), what was the primary product the companies produced? Computers You Answered No products, these were service companies Correct Answer Bearings Control Systems
Bearings
One of the largest private equity firms, according to class session, is... Correct! Blackstone Blackrock Gemini Global Management Fidelity
Blackstone
Which of the following is NOT a reason/motive for an acquisition? You Answered Building a conglomerate Filling in the holes Correct Answer Growing organically Looking for synergies
Growing organically
A combination of two firms that produce the same products and/or services is known as what kind of merger? Vertical Conglomerate Correct! Horizontal Congeneric
Horizontal
According to the class presentation, which if the following is not one of the mentioned features of many hedge funds? Often, management companies get 2% and 20% from the fund. Uses sophisticated investing and trading strategies. Correct! Investments are limited to high risk assets such as derivatives. Faces relatively little regulation. Investments are not very liquid. Investors include institutions and high net worth individuals.
Investments are limited to high risk assets such as derivatives.
According to class session, Blackstone participates in private equity "secondaries." What is this? These are second-tier private equity investments. Returns on this tier are lower than the returns on the first tier. Correct Answer It is a secondary market in private equity investments. You Answered These are second-tier private equity investments that have lower risk than first-tier investments.
It is a secondary market in private equity investments.
Which of the following banks was allowed to fail during the financial crisis of 2008? Correct! Lehman Brothers Salomon Brothers Merrill Lynch JP Morgan
Lehman Brothers
When a corporation decides that it wants to buy another company, no matter what the cost, this is usually an example of what? The company has done careful analysis of all similar companies to determine the right price Correct! Management ego or hubris The company has done a careful analysis of all similar deals to determine the right price The company has done a full discounted cash flow analysis to determine the right price
Management ego or hubris
Large payments that are time-sensitive are typically paid via what type of system? Correct! RTGS Cash Checking ACH
RTGS
When an Investment Bank suggests a potential sale of an entire company of a division of a company to a corporate client this is know as: Correct! Sell Side - Push Sell Side - Pull Buy Side - Push Buy Side - Pull
Sell Side - Push
According to class session, how did the 2008 financial crisis affect Merrill Lynch? The company had been the largest partner with Lehman Brothers. After Lehman collapsed, Merrill was also on the verge of collapsing until it was bought by BNY Mellon. The company had been the largest partner with Lehman Brothers. After Lehman collapsed, Merrill was also on the verge of collapsing until it was bought by Wells Fargo. Correct! The company had been a leader in the markets for collateralized debt obligations and mortgage backed securities. Losses in these markets forced Merrill into a merger with Bank of America.
The company had been a leader in the markets for collateralized debt obligations and mortgage backed securities. Losses in these markets forced Merrill into a merger with Bank of America.
According to class session, what is a way for investors to participate in the real estate market without actually owning property? Use the CRE ETF. Correct! Use REITs. Invest in one of the many SPACs that are set up to own commercial real estate property. Obtain the CRE credential.
Use REITs.
The investment bank that basically manages a syndicate of several other banks when moving toward an issue of bonds or stocks is called... a lead contestant. Correct! a lead underwriter. the primary advisor. the beauty parade master of ceremonies.
a lead underwriter.
A frequently used strategy for obtaining the capital used in a private equity transaction is... Correct! a leverage buyout. bankruptcy proceeding. obtaining a commercial bank loan for the partnership. a complex mathematical model, often designed by academics.
a leverage buyout.
According to class session, Goldman Sachs is organized into four business segments. Which of the following is not one of this segments? investment management investment banking institutional client services Correct! consulting and analysis
consulting and analysis
Robert Merton and Myron Scholes were two individuals involved in Long-Termm Capital Management who also... were prominent long-time Wall Street traders. developed the market for junk bonds. Correct! received the Nobel Prize in Economics. were the first to report SEC rules violations at the firm.
received the Nobel Prize in Economics.
According to class sessions, Morgan Stanley is in what group of investment banks? tier three boutique Correct! tier one tier two
tier one
The title of the recommended book When Genius Failed, was in large part a reference... to the control of LTCM by John Meriwether, who was recognized as the "smartest guy on Wall Street," in the 1990s. to the absence of hedge fund regulation promoted by economist Alan Greenspan. to the first use of artificial intelligence at Long-Term Capital Management to autonomously determine trading strategies. Correct! to the involvement in LTCM of academics Myron Scholes and Robert Merton.
to the involvement in LTCM of academics Myron Scholes and Robert Merton.
According to class session, a lot of CFOs today come from what part of the finance function in the firm? operations external auditing Correct! treasury management controller management and accounting
treasury management
A bond that has a face value of $1,000 and a coupon of $50 would pay... a total return on investment of 5.0%. Correct Answer $25 every six months. You Answered $50 every six months. $1,050 when the bon matures.
$25 every six months.
The primary party that is responsible for making a payment is known as the: Beneficiary Payee Bank Correct! Payor
Payor
Say that Apple buys Netflix. This would be an example of... a company growing organically. Correct! a company growing inorganically. a target capital structure. a pure ego-based acquisition.
a company growing inorganically.
WACC stands for weighted average cost of capital, and it is maybe best explained as... Correct! a company's cost of debt weighted by how much debt it carries added to the company's cost of equity weighted by how much equity it uses to finance assets. a function of accrual accounting that is not so relevant to financial managers. a company's average interest rate paid on debt multiplied by its average cost of obtaining equity. a ratio with the company's cost of debt in the numerator and the cost of equity in the denominator.
a company's cost of debt weighted by how much debt it carries added to the company's cost of equity weighted by how much equity it uses to finance assets.
A typical liquidity event for investors in a growing company is... obtaining a 2.0 or greater current ratio. reaching prototype stage. reaching $100,000 in revenues. Correct! an IPO.
an IPO.
According to class presentation, a REPO is... an agreement by anyone borrowing money to provide collateral that can be repossessed if the borrower defaults on the loan. a contract with the US government to buy T-bills at a specific time in the future. a contract with the US government to sell T-bills at a specific time in the future. Correct! an agreement by a bank to sell a security for some cash and then buy it back later at a slightly higher price.
an agreement by a bank to sell a security for some cash and then buy it back later at a slightly higher price.
US government T-bills are priced at a discount. For example, if a one-year T-bill worth $1,000 is priced at a 5.0% discount, an investor would... receive a profit only if the government keeps the T-bill outstanding for more than a year. Correct Answer buy it for $950. You Answered receive a profit only if it can be sold for more than $1,000. sell it when it matures at $950.
buy it for $950.
An asset bubble... happens when any prices rise more than 10% a year. Correct! is any unusual and extended rise in asset prices. is always a stock market phenomenon.
is any unusual and extended rise in asset prices.
The process of allocating funds for investments in long-term assets is called... Correct! capital budgeting. terminal value. working capital management. relative valuation.
capital budgeting.
ccording to a recent class session, accounting is great at bringing attention to revenue, expenses, and profits. Finance focuses more on... You Answered bonds and stocks. shareholders. interest rates. Correct Answer cash flow.
cash flow.
US government T0-bills are securities bought and sold... in the commercial paper market. in the stock market. Correct! in the money market. only by the Federal Reserve.
in the money market.
It makes good sense that a company's basic return on assets should be greater than... its operating profit margin. Correct Answer its cost of capital. You Answered its return on equity. its return on free cash flow.
its cost of capital.
Say your company has a stock beta of 1.85. Generally, if the market moves up in one month by about 5.0%, then your company likely... moves up by about 1.85%. moves lower by more than 5.0%. Correct! moves up about 9.25%. moves up about 5.0%.
moves up about 9.25%.
According to class presentation, stocks have two kinds of investment risk. These are stand-alone risk and... bankruptcy risk. Correct! portfolio risk. standard deviation. price risk.
portfolio risk.
According to class session on the D'Leon case, financial statements that project details into the next year or so are called... Doppler forecasts. Correct! proformas. accruals. pending financials.
proformas.
A simple way to think about accrual accounting is that... You Answered depreciation is determined based on how many years a piece of equipment is likely to be used. leading to a calculation of free cash flow. determining the free cash flow generated by a company's operations. Correct Answer revenues are matched up with the relevant costs.
revenues are matched up with the relevant costs.
One of the consequences of Japan's asset bubble bursting is that... Correct! the Japanese economy suffered through two decades of almost no growth. These are known as the lost decades. many major Japanese banks failed in the following two years. it created contagion that led to the Asian financial crisis. unemployment in Japan soared to over 10% for the next few years.
the Japanese economy suffered through two decades of almost no growth. These are known as the lost decades.
How long did it take the Dow Jones index to recover to its 1929 high of 381? Correct! 25 years 15 years 5 years 10 years
25 years
Using the select financial information in the table below, what is this company's net margin? 21.4% 28.3% 20.4% Correct! 9.7% Net margin = net income / revenues
9.7%
As World War II was nearing its end, several countries, and their finance and economics experts, gathered to discuss a post-war international monetary system. Where did they gather? New York City, New York Correct! Bretton Woods, New Hampshire Washington, D.C. Montreal, Canada
Bretton Woods, New Hampshire
If you think you might be interested in obtaining the CFP credential, which of the workshops should you consider joining? A. Investment Management B. JP Morgan Financial Planning C. Charles Schwab Wealth Management D. Personal Financial Consulting E. Investment Banking
C. Charles Schwab Wealth Management
What is the primary financial goal for non-profit agencies? A. To maximize the value of the common stock B. To earn a profit for the owners C. To efficiently use the resources available to provide maximum benefits D. To work for the general public
C. To efficiently use the resources available to provide maximum benefits
One of the bright spots in attempts to improve diversity in financial services is... A. the appointment of a woman to head up JP Morgan Chase. B. a statistic showing that 40% of all entry-level positions are now held by women. C. the appointment of Jane Fraser as CEO of Citi.
C. the appointment of Jane Fraser as CEO of Citi.
During multiple class sessions, instructors noted that the most important step freshman should take right now is... A. to join the Financial Services Club and try to become an officer or committee chair. B. to enroll in the online version of F210 for the summer semester. C. to learn how to study at IU and make good grades.
C. to learn how to study at IU and make good grades.
According to class session, what was one of the signs of a potential bubble in commercial real estate in the early and mid 2000s? You Answered Effective tax rates on property income had risen to historic highs. Correct Answer Cap rates were falling. Cap rates were rising. Effective tax rates on property income had fallen to historic lows.
Cap rates were falling
The check clearing entity most used in the U.S. for clearing checks between banks in different regions is what? Bank Clearing House You Answered Correspondent Bank Correct Answer Central Bank or Monetary Authority Third-Party Clearing Entity
Central Bank or Monetary Authority
What is the primary benefit of using a re-invoicing center? Correct Answer Centralization of FX exposures Reduction in payment costs You Answered Improved global short-term liquidity management reduction in overall banking cos
Centralization of FX exposures
The Five C's of Credit include which of the following factors? Character, Capacity, Capital, Collateral, Checks Character, Certified, Capital, Collateral, Conditions Correct! Character, Capacity, Capital, Collateral, Conditions Character, Capacity, Cash, Collateral, Conditions
Character, Capacity, Capital, Collateral, Conditions
The local startup covered in class that uses an app to match up nonprofits with potential volunteer is... Correct! Civic Champs Doriot DeCarlo Animation Townee
Civic Champs
The key step in the payment process where banks or other parties exchange the payment information in order to transfer money between themselves is know as what? Settlement Payment Generation Payment Instructions Correct! Clearing
Clearing
Which of the key elements of financial regulation is typically linked to the fair allocation of credit? Market Confidence Maintaining a Safe and Sound Financial System Risk of Contagion Correct! Consumer Protection
Consumer Protection
What kind of derivative was AIG writing that got it into so much trouble, the government had to bail it out? Correct! Credit Default Swaps (CDS) Adjustable-Rate Preferred Stock (ARPS) Forward Rate Agreements (FRA) Asset-Backed Commercial Paper (ABCP)
Credit Default Swaps (CDS)
Some investment management firms specialize only in equity research. One of the companies highlighted in class that was such a specialist is... Correct Answer Muddy Waters. You Answered Guggenheim. Fidelity. PIMCO.
Muddy Waters.
The difference between the interest rate at which a bank lends to borrowers and the interest rate the bank pays to depositors is known as: Correct! Net Interest Margin Default Margin Gross Profit Margin Deposit Insurance Margin
Net Interest Margin
According to class session, one way to think about investment banking is... A. that it is a lot about deal making. B. as a career emphasizing knowledge about macroeconomics. C. as a career emphasizing much data analysis and spreadsheet modeling. D. that it is about market makers.
A. that it is a lot about deal making
According to the discussion in class, the worst merger of two large companies is considered to be... Citibank and Traveler's Insurance Kmart and Sears Correct! AOL and Time Warner Amazon and Whole Foods
AOL and Time Warner
Which of the following is not an important advantage of debt financing? Correct! The firm owner can cancel the debt within six months with no penalty. The firm owner retains complete ownership. The cost of debt is less than the cost of equity. Lenders can provide value-added services and advice.
The firm owner can cancel the debt within six months with no penalty.
What are the three basic choices for investments, according to class presentation? stocks, bonds, and commodities Correct! cash, bonds, stocks stocks, capital markets, and cash capital markets, currencies, and commodities
cash, bonds, stocks
The sample equity analysis report available to you is... from Seeking Alpha and covers GE's recent decision to break up the company into three separate parts. Correct! from JP Morgan and covers 21st Century Fox. from JP Morgan and covers Rivian. from Seeking Alpha and covers Rivian.
from JP Morgan and covers 21st Century Fox.
According to the class presentations, investment management is all about... constructing targeted portfolios of equities. using sophisticated quantitative models to reduce risk and increase returns. Correct Answer helping investors make good decisions. You Answered research stocks and offering buy, sell, or hold recommendations.
helping investors make good decisions.
Government T-Bills are considered to be... are priced at a premium, or priced at something greater than $1,000. riskier than money market funds. Correct! the benchmark for risk-free rates. risky because in the short-term the US government could decide to not pay the interest due.
the benchmark for risk-free rates
Company assets represent things the firm owns. Liabilities and equity represent... You Answered the cumulative profits and cash flows generated by the assets. how much cash is available for shareholders. Correct Answer the claims on those assets. how much cash is available for all the firm's investors.
the claims on those assets.
An example given in class for why a seemingly good company might show equity falling in recent years pointed to... a drop in retained earnings. more net profits going to dividends. Correct Answer the company buying back shares of its own stock. You Answered a drop in the company's stock price.
the company buying back shares of its own stock.
According to class session, which of the following items represents a key problem of D'Leon? The pecan products at the heart of the business did not meet FDA testing requirements early enough in the year. You Answered The company expanded fast by opening up a chain of stores throughout Louisiana and Texas. Those store used a lot of capital and never hit revenue goals. Correct Answer The company expanded fast by investing a lot of capital into new equipment that then didn't always work properly. The company relied almost entirely on credit sales, though many of its customers never paid for the product.
the company expanded fast by investing a lot of capital into new equipment that then didn't always work properly.
According to class session, the target capital structure is... Correct! the mix of debt and equity the company financial managers hope will minimize the weighted average cost of capital. the mix of dividends and stock buybacks used to return profits to shareholders. the ideal capital structure that results in zero risk. the ideal capital structure that maximizes cash balances.
the mix of debt and equity the company financial managers hope will minimize the weighted average cost of capital.
All companies that have publicly traded stock submit an annual report to the SEC. This report is called... an SEC document 1.0. Correct! a 10-K. a 10-Q. an fiscal year report.
a 10-K.
According to class session, the target capital structure is... the ideal capital structure that maximizes cash balances. Correct! the mix of debt and equity the company wants to use to finance a project. the mix of dividends and stock buybacks used to return profits to shareholders. the ideal capital structure that results in zero risk.
the mix of debt and equity the company wants to use to finance a project.
The short video played in class framed the idea of entrepreneurship as... the process of identifying pain points that can then be addressed with new products or services. Correct Answer the process of identifying unhappiness and developing a business to make some people happier. You Answered the process of identifying innovations that can help solve business and social problems.
the process of identifying unhappiness and developing a business to make some people happier
GAAP references... a method for determine a company's cost of capital. an asset-to-asset program sponsored by the US government. Correct! the standard accounting rules and conventions used, mostly in the US. a set of accounting principles used only for private companies in the US, since these companies do not have to file public financial statements.
the standard accounting rules and conventions used, mostly in the US.
Companies return cash to shareholders whenever... it has too many positive net present value projects. company growth falls below 10.0%. You Answered it needs to reduce its tax rate. Correct Answer there is more cash than is needed to invest in growth opportunities.
there is more cash than is needed to invest in growth opportunities.
REITS are especially popular among some kinds of investors because... You Answered they are one of the few convenient investments with dividends that are taxed at low rates in order to encourage real estate development. Correct Answer they pay a substantial portion of profits to shareholders as dividends. they have a track record of steady price appreciation. they experience one of the highest growth rates outside of the tech industry.
they pay a substantial portion of profits to shareholders as dividends.
One of the aspirational goals of the commercial real estate broker in Denver was... to succeed well enough that he might have his own name on his developments, as Donald Trump does. Correct Answer to earn enough to invest in his own properties and earn passive income. You Answered to establish his own commercial real estate company so that he can hire and train young professionals. to be recognized as one of the top real estate brokers in Denver.
to earn enough to invest in his own properties and earn passive income.
Operating income and EBIT are often the same numbers... and they both indicate revenues directly attributable to the company's basic business model. You Answered and they both indicate whether a company can obtain basic goods or services at a profit. Correct Answer unless a company reports some non-operating income or expense. unless a company faces especially high taxes expenses.
unless a company reports some non-operating income or expense.
The Latin American debt crisis was finally relieved... when Mexico declared bankruptcy and essentially restarted its economic and banking systems. when Alan Greenspan became chairman of the Federal Reserve in the late 1980s. when Bank of America and Citibank forgave most of their loans to troubled countries. Correct! with the introduction of Brady Bonds in the late 1980s.
with the introduction of Brady Bonds in the late 1980s.
What is the definition of the Cash Conversion Cycle? A. The time it takes to convert a cash outflow into a cash inflow. B. The time it takes for a company to cash the checks it receives from its customers. C. The time it takes to move money from one bank to another. D. The time it takes to convert foreign currency flows in the dollars.
A. The time it takes to convert a cash outflow into a cash inflow.
Handshake is... A. a platform for connecting Kelley students with recruiters. B. a networking platform for connecting Kelley students with Kelley alumni. C. a site sponsored by the Undergraduate Career Services packed with various resources related to careers.
A. a platform for connecting Kelley students with recruiters.
Kelley Connect is... A. a site of many resources available for Kelley students. B. a series of networking opportunities for Kelley students and Kelley alumni. C. a platform for connecting Kelley students with recruiters
A. a site of many resources available for Kelley students.
How did the US government effectively bailout the big banks? According to the video clip played in class, the US government created a separate agency to buy up all of the mortgages owned by the nine biggest banks. According to the video clip played in class, the US government forced 12 major banks to consolidate into just eight. You Answered According to the video clip played in class, the US Federal Reserve acted in the last minute to buy shares in all the major banks and become a secret partner. Correct Answer According to the video clip played in class, the US government forced all the big banks to take a large injection of capital, whether or not the banks were actually in trouble.
According to the video clip played in class, the US government forced all the big banks to take a large injection of capital, whether or not the banks were actually in trouble.
One of the recommended sites for investing and markets was Seeking Alpha, a sort of crowd-sourced site for stock analysis. The "alpha" in the name is a reference to... A. the first letter of the Greek alphabet and a branding for Seeking Alpha to be your number one site for investment analysis. B. Jensen's alpha. C. the first letter of the Greek alphabet and a signal to be a number one investor. D. Alpha Tau Omega (or ATO), the college fraternity of the founder of Seeking Alpha.
B. Jensen's alpha.
Ensuring the company's ability to meet current and future financial obligations in a timely and cost-effective manner is related to which of the following treasury management objectives? A. Maintain investments B. Maintain liquidity C. Optimize cash resources D. Maintain access to short-term financing
B. Maintain liquidity
All of the following statements are true, EXCEPT: A. A shared services center is a department or operation within a multi-unit organization that supplies multiple business units with specialized services. B. Most treasury functions are set up as a profit center. C. In-house Banks are typically most beneficial for complex, multinational organizations. D. Few companies operate a fully decentralized treasury operation.
B. Most treasury functions are set up as a profit center.
Should you consider a minor to accompany your finance or real estate major? A. The only minor finance or real estate majors will have time to fit in their schedules in accounting. B. Sure. But as a Kelley major, you must minor in a subject outside the business school. C. Sure. Good minors for you might be international business, accounting, management, and entrepreneurship. D. No. The business major requirements are extensive, and most students will not have enough time in four5 years to pick up a minor.
B. Sure. But as a Kelley major, you must minor in a subject outside the business school
Freshmen in the course should use which format for the resume assignment? A. Whatever format is recommended by the Financial Services Club. B. The freshman resume example from UCS. C. The format recommended for students in F210. D. The format that is typical for corporate finance positions.
B. The freshman resume example from UCS.
Which of the following careers was noted during class sessions as hiring the largest number of Kelley finance majors? A. investment banking B. corporate finance C. accounting D. consulting
B. corporate finance
Which of the pairs of courses listed below are important finance courses required of all majors after I-Core? A. F311 and F312 B. F210 and F310 C. F370 and F371 D. F303 and F305
D. F303 and F305
The finance professional who is primarily responsible for arranging external financing and managing relationships with banks and other financial institutions is the A. Cash Manager B. CFO C. Controller D. Treasurer
D. Treasurer
If you intend to participate in the X272 Global Business Immersion program, you'll need to be prepared to apply for this program... A. during spring semester of your sophomore year. B. during summer of your sophomore year. C. during spring semester of your freshman year. D. during fall semester of your sophomore year.
D. during fall semester of your sophomore year.
We looked at financial statements quickly online at Yahoo! Finance. There, we discovered that TTM is short for... A. time to modification. B. traditional Tibetan medicine C. total twelve months D. trailing twelve months.
D. trailing twelve months.
Based on the data provided in our lectures, what area represents the largest percentage of fees collected on average by investment banks? Correct Answer Debt Capital Markets You Answered Mergers and Acquisitions Loans Equity Capital Markets
Debt Capital Markets
All of the following are typical uses for ACH debits, EXCEPT: Correct! Direct deposit of payroll Utility payments Tax payments Cash concentration
Direct deposit of payroll
According to the class lecture on the 2007/08 financial crisis, what government agency was an early developer of the straight pass through pools of conforming mortgages? Correct Answer Government National Mortgage Association (Ginnie Mae) Consumer Financial Protection Bureau Office of the Comptroller of the Currency You Answered Federal Reserve
Government National Mortgage Association (Ginnie Mae)
Which of the following is NOT considered part of Monetary Policy? Managing the Money Supply Correct! Government Spending Setting Interest Rates Changing Reserve Requirements
Government Spending
Which of the following items are included in the traditional 3-way match of the A/P vouchering process? I. Purchase OrderII. Shipping ManifestIII. Receiving AdviceIV. Catalog PricingV. InvoiceVI. Remittance Information I, II and VI Correct! I, III and V II, IV and V I, V and VI
I, III and V
Which of the following mergers was provided as an example of a conglomerate merger? Live Nation/Ticketmaster Correct! Ingersoll/Rand Exxon/Mobile Ford/Hertz
Ingersoll/Rand
This person founded the first investment bank in Philadelphia in order to help fund the American Civil War. Correct! Jay Cooke Bejamin Franklin Cornelius Vanderbilt John Pierpont Morgan
Jay Cooke
What was the game used in the clip from the Big Short to illustrate the problems in the real estate and mortgage-back securities market? Operation Correct! Jenga Pick-Up-Sticks Hungry Hippo
Jenga
Which stage of money laundering involves a series of financial transactions designed to separate cash proceeds from their criminal or terrorist origins? Correct! Layering Taxation Placement Inegration
Layering
Probably somewhat surprising from the class session in entrepreneurial finance was this: Correct! Less than 1.0% of startups raise venture capital. Less than 1.0% of startups succeed after the first two years. About 15.0% of startups begin in dorms rooms. Only about 1 in 10 startups receive funding from angel investors.
Less than 1.0% of startups raise venture capita\l
Say that Home Depot raises capital by issuing bonds in Canada that are denominated in Canadian dollars. These bonds will be called... Yankee bonds. Samurai bonds. Correct! Maple bonds. Rocky Mountain bonds.
Maple bonds.
The two financial economists who researched and published on capital structure are... You Answered Merton and McKenzie (M&M) Fama and Jensen. Correct Answer Modigliani and Miller (M&). Fama and Roll.
Modigliani and Miller (M&).
Developments which may prompt significant changes in Accounts Receivables include all of the following EXCEPT: Correct Answer Steady sales volume You Answered Foreign currency valuations Fluctuations in economic conditions Modifications of credit standards policy
Steady sales volume
Which of the following factors will have an impact on a company's days' receivables? The average number of days raw materials remain inventory The average number of days finished goods remain in inventory The average number of days needed to convert raw materials into finished goods Correct! The average number of days required to convert a credit sale into a collection
The average number of days required to convert a credit sale into a collection
Which of the following is an interesting element of the D'Leon company according to its balance sheet and as described in class? Correct! Total assets doubled in 2019 from 2018. Sales doubled in 2019 from 2018. Operating income dropped to about $131,000 in 2019 from about $190,000 in 2018. Retained earning doubled in 2019 from 2018.
Total assets doubled in 2019 from 2018
According to F100 class sessions, there are three big questions for finance professionals to answer. We've addressed these in multiple class sessions, most recently during Week #10. What are those three big questions? What are the company's future cash flows, what is the weighted average cost of capital (WACC), and what is the resulting present value of this cash flows? What should the company invest in, what proportion of debt and equity should the company use, and what is the best arrangements for the company's on-hand cash? Correct! What should the company invest in, how should the company finance its investments, and how should the free cash flows be allocated (or distributed)? What businesses should the company be in, how much capital should be allocated to each of its business divisions, and how should the resulting cash be invested?
What should the company invest in, how should the company finance its investments, and how should the free cash flows be allocated (or distributed)?
Using the select financial information in the table below, what is this company's return on equity (ROE)? about 28% about 4x about 41% about 20% ROE = net income / shareholders' equity
about 28%
The returns paid to investors are effectively... Correct! costs of capital to the company. higher only if the company is mature and well established. risk free. the same returns made by the market overall.
costs of capital to the company.
The role of the commercial real estate developer was defined in class session as... supervising the commercial real estate construction. primarily devoted to finding investors in a project. primarily devoted to financing a project. Correct! creating and executing the vision of making a property productive.
creating and executing the vision of making a property productive.
Most foreign exchange rates are set... in a market where key currency traders agree on the end-of-day price. Correct! in a market where supply and demand determine prices. using a structure known as pegged exchange rates. using a structure known as managed float.
in a market where supply and demand determine prices.
lients of investment management firms are typically... educational institutions and foundations. individuals with wealth of at least $1 million. insurance companies and pension plan companies. Correct! institutional investors and individual investors - usually high net worth individuals but also many normal net worth individuals.
institutional investors and individual investors - usually high
Interest rates and bond prices are... set by the Federal Reserve. unrelated. Correct! inversely related. closely linked, so that bond prices rise if interest rates rise.
inversely related.
Large corporations that want to borrow very short term might well... issue T-bills. You Answered issue T-bonds. borrow from overseas banks. Correct Answer issue commercial paper.
issue commercial paper.
One reason to downplay some of the exciting elements of startups, such as getting together with venture capitalists, is... most venture capital professionals are not interested in startups. no more than 10.0% of all startups conduct pitches to venture capital professionals. Correct! less than 1.0% of startups ever raise venture capital. almost all startups use bank loans for initial capital.
less than 1.0% of startups ever raise venture capital.
Since the 2007-2008 financial iris, the Federal Reserve has included which of the following as a large portion of the assets on its balance sheet? commercial paper certificates of deposit You Answered equity holdings in hedge funds Correct Answer mortgage backed securities
mortgage backed securities
Anyone can make good investments and end up with positive returns - with profits. The thing about arbitrage profit is that it is... Correct! mostly guaranteed due to differences in prices. mostly limited to the risk-free rate. not enough to cover transactions costs. dependent on the Fed funds rate.
mostly guaranteed due to differences in prices.
The stock market crash in October 1987 was dramatic because... it marked the beginning of the dot-com asset bubble. of a one-day drop of about 35%. Correct! of a one-day drop of about 23%. it marked the beginning an 18-month recession.
of a one-day drop of about 23%.
If you become an equity analyst at an investment management firm, you will be studying stocks and writing reports... on the buy side. for your investment banking partner. Correct! on the sell side. for the ratings agencies.
on the sell side.
A key benchmark rate used in lending between major global banks is called... Correct! the London Interbank Offered Rate, or LIBOR. the Prime Rate. the Euro Benchmark Rate. the Fed funds rate.
the London Interbank Offered Rate, or LIBOR.
