Fin 301 exam - Study guides, Class notes & Summaries

Three Primary Areas of Finance - Answer-1. Corporate finance : how they manage $ 2. Institutions & Markets : dominate economic market 3. Investments : decisions of buying stock/market Basic Corporate Financial Decisions - Answer-The Investment Decision: allocating scarce resources across competing users? The Financial Decision: raising funds to finance these projects? The Dividend Decision: returning funds to investors? corporate financial toolbox- accounting statements & ratios, prese...

Net Present Value Definition - Answer-Incremental or marginal net value created by undertaking a project Net Present Value Decision Rule - Answer-1) If the NPV is positive, accept the project 2) Most reliable method to compare and evaluate projects A positive NPV is expected to..? - Answer-* add value to the firm, and therefore increase the wealth of the owners * NPV directly measures the increase in value to the firm Advantages to using the payback period approach? - Answer-1) Easy t...

A general partnership has which of the following? 1. Each owner has unlimited liability for all firm debts. 2. It is expensive to form. 3. It is difficult to transfer ownership. 4. Large amounts of cash can be raised easily. - Answer-1 & 3 Someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm - Answer-Stakeholder A corporation is a distinct ______ entity. It can have a name and take advantage of the legal powers of natural persons. - Answer-l...

Maturity of the Bond - Answer-The number of years until the issuer returns the face value to the buyer Face value - Answer-The principal of the bond, which has to be repaid at maturity NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV greater than 0 because it adds value to the firm equal to the NPV. NPV is Measuring - Answer-Value creation Return on Investment - Answer-IRR is Measuring Par - Answer-sales price equals maturity values Discount - Ans...

There are four basic principles of finance. Which principle correctly describes the following statement: "A dollar today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today"? - Answer-Principle 1: Money has a time value In a large corporation the primary responsibility for overseeing the firm's finance-related activities falls to the - Answer-Chief Financial Officer (CFO) The typical business organi...

Firms use capital to: (i) purchase a company (ii) pay for day-to-day expenses (iii) establish or expand a business A) i B) ii C) ii & iii D) all of the above E) iii F) none of the above G) i & iii - Answer-G) i & iii Which of these items are considered part of a firm's capitalization? (i) Assets (ii) Debt Liabilities (iii) Equity (iv) Operating Liabilities A) (i) and (iv) B) None of the listed answers C) (i) and (iii) D) All of the listed answers E) (ii) and (iii) - A...

What is finance - Answer-the study of how and under what terms funds are allocated between those with excess funds and those who need funds. Primary Areas of Finance: - Answer-1. corporate finance 2. investments and valuation 3. capital markets and financial institution Primary Areas of Finance: Corporate Finance (or Business Finance, or Financial Management) - Answer-how companies raise and invest money and manage their financial resources Primary Areas of Finance: Investments and v...

A firm's capital structure is comprised of only the firm's long-term sources of financing while the firm's financial structure includes both short- and long-term debt and equity financing. - Answer-True A corporation's optimal capital structure is usually the one that will lead to the maximization of the weighted average cost of capital. - Answer-False Financial leverage is derived from the fixed costs of a firm's financing and can have the effect of magnifying the change in earnings ...

The primary role of financial markets is to [blank1] the flow of funds from individuals and businesses - Answer-facilitate Which informational form takes all information contained in past price movements is reflected in current market prices? a)Weak Form b)Semi Strong Form c)Strong Form - Answer-a)Weak Form If you have private information, under which informational form can you make excess returns? a)Semi Strong Form b)Weak Form c)Strong Form - Answer-a)Semi Strong Form The o...