Finance Exam 1

Primary goal of financial management maximize the current value per share of the existing stock
Capital Budgeting the process of planning and managing a firm’s long-term investments
Capital Structure the mixture of debt and equity maintained by a firm
Working Capital Management the managing of short-term assets and liabilities
A good example of a Pure discount loan, an Interest-only loan, and an Amortized loan is Treasury bill, a corporate bond, and mortgage loan respectively
capital structure decision determining how much debt should be assumed to fund a project
Sole proprietorship owner is personally liable for all company’s debts
Amortized loans must have which one of these characteristics? Either equal or unequal principal payments over the life of the loan
An example of capital budgeting decision is deciding Whether or not to purchase a new machine for the production line
What will increase the present value of an amount to be received sometimes in the future A decrease in the interest rate
Working Capital management decisions include determining The minimum level of cash to be kept in a checking account
Ratios that measures a firms liquidity are known as …. ratios Short-term solvency
Seconds markets securities are bought and sold after the original sale
Dealer Markets (OTC) Electronic trading
Auction markets (exchanges) Physical locationMatch buyers and sellersNYSE (fewer firms, but much larger firms)
Primary markets markets in which corporations raise capital by issuing new securities
Liquidity Ratios Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
Debt Management Ratios degree to which a firm can meet it’s long-term financial obligations
asset management ratios A set of ratios that measure how effectively a firm is managing its assets.
Profitability Ratios measure the income or operating success of a company for a given period of time
Market Value Ratios Ratios that relate the firm’s stock price to its earnings and book value per share.

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