Finance

The participants in the cycle of money​ are: A. the original​ lender, usually an individual​ (or household) through direct investment or through a financial institution. B. the Federal Reserve which controls the money supply and provides money for business loans. C. the financial institution that matches the lender with a borrower or bundles up a set of lenders for a single borrower. D. a borrower such as a company that is using the funds for operating the business or expanding the business.

A, C & D A. the original​ lender, usually an individual​ (or household) through direct investment or through a financial institution. C. the financial institution that matches the lender with a borrower or bundles up a set of lenders for a single borrower. D. a borrower such as a company that is using the funds for operating the business or expanding the business.

Select the statements below which correctly describe the relationship between a company and the community within which it operates. A. If the firm pollutes local streams or destroys the quality of life through noise pollution or other types of​ pollution, the local community may sue the company for its damages and the best local workforce members may choose not to work for the company. Your answer is correct. B. If a company fails to maintain a good relationship with the​ community, employees may not be loyal to the company causing high turnover and increased personnel costs for recruiting and training. Your answer is correct. C. Maintaining a good working relationship with the surrounding community is a good business practice. Your answer is correct. D. If a company abuses local facilities such as​ roads, and in general does not participate in the economic advancement of the local​ community, facilities such as roads and utilities may not be repaired or modernized by the local community impacting the​ company's ability to produce a profit. Your answer is correct. E. A good community relationship is embedded in the goal of maximizing current share price or the equity value of the company.

All are correct

The objective of every financial transaction​ is: ​ A. to ensure that borrowers are able to make purchases. B. to make all parties in the transaction better off. C. to ensure that financial institutions remain strong. D. to enrich the lenders.

B. to make all parties in the transaction better off.

The cycle of money​ is: A. the movement of money from a borrower to a lender and back to the borrower. B. the movement of funds from a lender to a borrower and back to the lender. C. the movement of money from your checking account to the Internal Revenue Service and back to you in the form of a Social Security check. D. the movement of funds from your savings account to your checking account and back to your savings account.

B. the movement of funds from a lender to a borrower and back to the lender.

The financial management function is generally defined​ as: A. those activities which reduce cash outflows for the​ individual, small business or corporation. B. the movement of money from lender to borrower and back again. C. those activities which create or preserve the economic value of the assets of an​ individual, small business or corporation. D. those activities which reduce revenue for an​ individual, small business or corporation.

C. those activities which create or preserve the economic value of the assets of an​ individual, small business or corporation.

The primary goal of the financial manager is​ to: A. provide for the economic growth of the community in which the firm resides. B. ensure that the firm maintains its level of employment within the community so that people are not laid off. C. improve relations with the community even at the expense of corporate profits. D. maximize the current share price or equity value of the firm.

D. maximize the current share price or equity value of the firm.

That a company chooses a new product to introduce into the market is a

capital budgeting decision

that a company chooses to sell a bond to finance the new product is a

capital structure decision

a business form in which the company is a​ legal, separate entity from the owners and can enter into​ contracts, can sue or be​ sued, and pays taxes. The key advantage of this type of organization is that the shareholders or owners have limited liability. A second advantage is the size of the organization which allows it to borrow money from banks and capital markets. One disadvantage of this form of business organization is that company profits are taxed prior to distribution to the owners and then the owners may be taxed again on distributions received. This form of business organization generally incurs greater​ legal, administrative and accounting expenses to form and run the company.

corporation

a business owned jointly by two or more individuals. The advantages of this form of business are that it involves more than one person in the business and all the profits are distributed to only this set of individuals. The larger number of owners usually increases the amount of capital and talent available over that available to the sole proprietorship. The disadvantage of this form of ownership is that the personal assets of the owners are commingled with the business assets and could potentially be required to settle business debts. Other disadvantages of this form of ownership is that taxes are paid at personal income tax​ rates, which may be higher than corporate tax rates and transference of ownership may be potentially difficult if one of the owners dies or wants to leave the business. ​

partnership

a business that is entirely owned by an individual. This is the simplest and least complicated business organization with the least amount of formal documentation required. It is also the least regulated form of business. The major advantages of this type of business organization are that the owner makes all the​ decisions, can act quickly to make business decisions and keeps all of the profits. The financial disadvantage of this form of business organization is that the owner pays all the company bills and may even be required to sell off personal property to cover them. Other disadvantages of the​ (sole proprietorship,​ partnership, corporation) include difficulty in passing the business to a new owner and a limited ability to raise capital which may impede the growth and development of the business.

sole proprietorship

​"Financial managers, such as a Chief Financial​ Officer, work closely with the​ treasurer, the​ controller, investor relations and other departmental managers to insure that corporate financial controls are in place and​ enforced."

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​"One of the key​ player(s) that the financial manager works with is the auditing firm of the company. Together with the controller a financial manager works with the Auditing Company to insure that proper controls are in place for the economic activities of the firm. Auditors review the process of checks and balances within the company to insure that access to funds and information is appropriate and that financial transactions are recorded and reported in such a manner as to provide potential investors and current owners accurate information about the performance and condition of the​ company." (t/f)

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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.

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.

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.

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.

primary market

the market where the initial sale of common stock is made by a company and the proceeds of the sale go to the company for the newly issued stock

secondary market

the sale of​ "used" stock in that the current owner sells it to a new owner and the proceeds go to the current​ owner, not the​ company

that a company sets production and inventory levels on the new product is a

working capital management decision