FIN 320F Exam 1 Study Set Latest
Update Graded A+
What is the primary goal of financial management?
To maximize shareholder wealth.
What is the difference between a primary market and a secondary market?
A primary market involves the initial issuance of securities, while a secondary ma...
FIN 320F Exam 1 Study Set Latest
Update Graded A+
What is the primary goal of financial management?
✔✔ To maximize shareholder wealth.
What is the difference between a primary market and a secondary market?
✔✔ A primary market involves the initial issuance of securities, while a secondary market
involves the trading of previously issued securities.
What is the purpose of financial statements in a business?
✔✔ To provide information about the financial performance and position of a company.
What does the term "liquidity" refer to in finance?
✔✔ The ability to convert an asset into cash quickly without significant loss of value.
What is the formula for calculating the future value of an investment?
✔✔ Future Value = Present Value × (1 + interest rate)^number of periods.
1
,How is "debt" different from "equity" in a company's capital structure?
✔✔ Debt represents borrowed funds that must be repaid, while equity represents ownership in
the company.
What is the role of a financial manager in a corporation?
✔✔ To make decisions that enhance the value of the firm for its shareholders.
What is "capital budgeting"?
✔✔ The process of planning and managing a company's long-term investments.
How does diversification affect investment risk?
✔✔ Diversification reduces the overall risk of a portfolio by spreading investments across
different assets.
What is the "time value of money" concept?
✔✔ Money today is worth more than the same amount in the future due to its potential earning
capacity.
2
,What is the "net present value" (NPV) of a project?
✔✔ The difference between the present value of cash inflows and the present value of cash
outflows.
What does the "return on equity" (ROE) measure?
✔✔ The profitability of a company in relation to shareholders' equity.
How do interest rates affect bond prices?
✔✔ When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices
generally rise.
What is the "weighted average cost of capital" (WACC)?
✔✔ The average rate of return a company must pay to its security holders, weighted by the
proportion of each type of capital.
What is meant by "risk-return tradeoff"?
✔✔ The principle that potential return rises with an increase in risk.
3
, What is the "current ratio" used to assess?
✔✔ A company's ability to pay its short-term liabilities with its short-term assets.
How is "return on assets" (ROA) calculated?
✔✔ ROA = Net Income / Total Assets.
What does the "price-to-earnings ratio" (P/E ratio) indicate?
✔✔ The valuation of a company by comparing its current share price to its earnings per share.
What is the purpose of "financial leverage"?
✔✔ To increase the potential return on equity by using borrowed funds.
What is the "break-even point" in financial analysis?
✔✔ The level of sales at which total revenues equal total costs, resulting in neither profit nor
loss.
What is "working capital"?
✔✔ The difference between a company's current assets and current liabilities.
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BrilliantScores. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $11.49. You're not tied to anything after your purchase.
