Finance Flashcards

3.1 Money and Finance

The importance of money. Money is the product of a long period of development. Having money enables people, communities and firms in modern economies to specialize in the production of those G&S they are best suited to, and subsequently use the money earned to buy all other G&S they may need or want from other producers.Without money, specialization and exchange will be difficult and therefore far fewer G&S will be produced and fewer wants will be satisfied.
Describe the functions of money. Medium of exchange. Money is a good that is generally acceptable in exchange for all other G&S without having to search/seek for someone who is willing to barter. It overcomes the problem of needing a double coincidence of wants. Trade is brought about by two transactions with money being used in each.
Describe the functions of money. Measure of value. Using money facilitates producers and consumers engaged in trade to avoid the problems of fixing prices of G&S in terms of all other G&S. All goods have a price expressed in terms of one single product-money. Money is a unit of account used to measure and compare the value of different G&S.
Describe the functions of money. Store of value. One of the problems with barter is that many goods are difficult to save either because they encompass excessive space or lose their value over time because they perish. Unless prices are rising rapidly, money tends to hold its value over time, allowing people to save in order to make purchases at a later date. Some people save by storing valuable antiques and works of art, items that we do not regard but which can be exchanged in return for money in the future, since as the prices of goods rise over time, purchasing power of money, or what it will buy, is reduced. When prices rise rapidly due to inflation, money will fail to be such a good/optimum store of value.
Describe the functions of money. Means of deferred payment. When a person purchases goods on credits the consumer has the use of the good without having to pay for them immediately. The consumer can pay after some time in the near future after receiving the goods. In the case of hire purchase, payment is made through instalments dissipated over a number of months or years. Credit in a barter system would be rather confusing and open to cheating. Using money to pay later overcomes these problems and henceforth, encourages people to engage in trade, reducing the worry of giving credit.
Characteristics important for a good money to possess. Acceptability. (ALL) Anything can be used as money as long as it is generally acceptable. Present money is token money- piece of paper or metal worth much less than face value printed upon it.
Characteristics important for a good money to possess. Durability. (DAY) Any good used as money must be hard-wearing. Coins and notes, or the commodity must be strong and durable so they may act as a store of value.
Characteristics important for a good money to possess. Portability. (PEOPLE) Money should be easily portable. Paper notes are lightweight.
Characteristics important for a good money to possess. Divisibility. (DIE) It must be possible to divide money of a large volume into smaller values to make small purchases or to give change, which is why notes and coins have different face values for purchasing G&S with different prices.
Characteristics important for a good money to possess. Scarcity. (SAD) Good money must be limited in supply/scarce if people and firms are to value it as a good to be used in exchange.
Describe the need for exchange. In a barter system trade is difficult as there is no guarantee of a fair rate of exchange. People are unable to specialize to their full potential and have to spend time and effort producing a range of G&S in order to increase the chances of trading successfully for things they need, meaning that much less is produced by whole economies than if they specialized in the production of those G&S they are best able to produce. Money encourages specialization by making trade simpler, enabling an economy to increase its national output and income and allow people to enjoy a much higher standard of living. In turn, the economy specializes more money needed to finance an increasing amount of production and trade. Money is needed by consumers, firms and governments to make payments to hire labour and purchase other resources, and G&S. Banking system can provide this money and make it easier to make payments. Therefore, as output of an economy grows the more trade occurs, so banking system must develop and create more money.
Generally acceptable forms of money. – Cash/notes and coins with different face values are generally accepted and recognized as money in all economies.- Savings in banks and other financial institutions can be classified as money because one day, deposits can be withdrawed to be exchanged for wanted G&S.
DEFINE Money Supply Total value of bank deposits (as well as in other financial institutions) and notes and coins circulating in an economy.
Finance Flashcards


An effective decrease in the supply of funds available in the market place would MOST likely lead to which of the following events?A » An increase in property values B » A decrease in property values C » An increase in the marketability of property D » A decrease in the marketability of property DWhen there are less funds available, generally the result is higher interest rates and a slowing of the economy. Therefore, the (D) answer is most correct in that it would be harder to sell or market property with higher interest rates, etc. (A) and (B) sound like possible answers but are not as good as (D) because the marketability of property is most affected.
An increase in the availability of money would lead to which effects? A » Interest rates would go up B » Interest rates would go down C » Interest rates would NOT be affected due to RESPA guidelines D » Interest rates would NOT be affected due to Truth in Lending B(B) Under the laws of supply and demand, an increase in supply (without a corresponding increase in demand) leads to a lower price for the product. Rates going up (A) usually results from a decrease in loan availability. RESPA (Real Estate Settlement Procedures Act) requires closing agents and lenders to close loans in a certain procedure. RESPA (C) does not affect interest rates. Truth in lending (D) laws require lenders to disclose the costs of borrowing money but do not affect the actual cost of the money.
Which of the following ways of advertising would be allowed under the Federal Truth-In-Lending Laws (Regulation Z)?A » $10,000 assumable loan in a working man’s neighborhood B » Shady acres – $10,000 down C » Shady acres – guaranteed to double in value in 5 years D » Shady acres – payments less than rent D(D) Generic language, such as payments less than rent, is allowed under Regulation Z. (A) $10,000 assumable loan, (B) $10,000 down and (C) guaranteed to double in 5 years are all trigger terms and would not be allowed to be advertised alone under Regulation Z.
Which of the following would be enforced by the Federal Trade Commission (FTC)?A » Federal Real Estate Settlement Procedures Act (RESPA) B » Federal Fair Housing (Title VIII) C » Federal Equal Credit Opportunity Act (FECOA) D » Federal Truth-In-Lending Law (Reg Z) D(D) The FTC enforces the Truth-In-Lending law (Reg Z). (A) RESPA is enforced by the Consumer Financial Protection Bureau (CFPB). (B) Fair housing laws are enforced by HUD. (C) The Federal Equal Credit Opportunity Act prohibits lenders from discriminating based on race, religion, marital status, age, etc.
Which of the following must be disclosed to be in compliance with Regulation Z? A » Loan costs B » Closing costs C » The tax bill D » Broker’s commission A(A) Regulation Z (Truth-In-Lending law) says that all loan costs must be disclosed upon loan application. Closing costs (B) include additional costs of closing in addition to loan costs. The tax bill (C) is not a loan cost nor is the broker`s commission (D).
Which of the following charges is NOT required to be included in a lender’s closing statement? A » Points B » Seller’s attorney’s fees C » Loan service fees D » Loan origination fee BAll “loan” costs must be disclosed. Attorney`s fees are not a loan cost. Points (A), loan service fees (C) and loan origination fees (D) are all “loan” costs and must be disclosed.
Regulation Z applies to a loan for which of the following purposes? A » Residential real estate purchases B » Vacant lot purchases C » Commercial real estate purchases D » Residential real estate leasing A(A) Regulation Z applies to residential loans on a 1-4plex. Regulation Z does NOT apply to (B) vacant lot loans, (C) commercial loans or (D) loans for leasing.
A loan company was referring loan applicants to a particular insurance company which in turn paid the loan company a referral fee. This is:A » legal as long as it is a set fee and not based on the amount of business referred B » legal as long as the loan company does not require a loan applicant to purchase insurance from a particular company C » illegal since the Real Estate Settlement Procedures Act prohibits kickbacks D » illegal due to the Truth in Lending Law (Regulation Z) C(C) RESPA (enforced by CFPB) prohibits the paying of referral fees or kickbacks. It cannot be paid regardless of how the fee is set (A). Even if the applicant can shop around, referral fees are illegal for a lender to receive (B). The truth in lending law requires lenders to disclose all loan costs to borrowers. It, in and of itself, does not deal with whether referral fees can be paid (D).
The paying of kickbacks by lenders is prohibited by: A » Regulation Z B » Real Estate Settlement Procedures Act C » Equal Credit Opportunity Act D » Interstate Land Sales Act B(B) RESPA prohibits lenders paying referral fees to brokers when all the broker does is provide the lead to the lender. Regulation Z (A) (truth in lending law) requires lenders to disclose all LOAN costs to borrowers. Equal Credit Opportunity Act (C) forbids lenders from discriminating in lending based on race, color, sex, national origin, religion, marital status and age. The Interstate Land Sales Act (D) requires developers who sell more than 100 lots across state lines to register with the Consumer Financial Protection Bureau (CFPB).
A buyer applying for a loan on a two family residence would be covered under RESPA in which of the following circumstances? A » If the loan was an FHA insured loan B » If it was a loan NOT typically bought by FNMA C » If it was part of a 45 acre farm D » If it was a second mortgage AA) RESPA (Real Estate Settlement Procedures Act) applies to new, first mortgages to buy a home if the lender is associated with the federal government. An FHA loan is insured by the federal government. Loans NOT of the type bought by FNMA are usually not associated with the federal government (B). Farm loans (C) are usually not covered under RESPA as farms are more of a type of business loan. Only first mortgages (D) fall under RESPA.
Broker Baird advertised a listed property as follows: “$3,200 down – call Baird Realty 476-1247.” Is this ad legal? A » Yes, because a broker may advertise the down payment B » Yes, as long as the broker uses his name and phone number C » No, because he did not list all the credit terms D » No, it is illegal to advertise a down payment C(C) Truth-in-lending requires that to tell ANY of the credit terms (such as the down payment), one must tell ALL the credit terms. A broker may advertise the down payment (A) but only along with all other terms. The name and phone number (B) being listed does not allow the broker to violate the truth-in-lending law. It is not illegal to advertise a down payment (D) unless it is advertised alone.
Why does Regulation Z require that the annual percentage rate be stated in applying for a loan?A » So businesses can know what it costs them to borrow money B » This is the easiest way for buyers to shop around and compare credit costs C » This is the total amount of the actual financing charge D » So buyers can know the interest rates B(B) Since the APR includes all the loan costs, it is easier to compare the total package between lenders (who may quote many of the individual costs separately) than it is to try to compare each of the individual costs. It does not apply to business loans (A). The APR may be different than the actual financing charge (C) since the loan may or may not be kept the total loan term (e.g. 30 years). The interest rate (D) is only a part of the annual percentage rate.
Which of the following would NOT be covered under RESPA?A » A VA loan for a $51,500 first mortgage on a single family residence worth $51,500 B » An FHA loan for a first mortgage on a single family residence C » A conventional loan for a three-family residence where the lender was insured by FDIC D » A buyer assumed a $39,000 FHA insured first mortgage on a $49,000 single family residence D(D) The Real Estate Settlement Procedures Act (RESPA) does NOT apply to assumed loans. (A) A VA loan, (B) FHA loan and (C) Conventional loan on a 1 – 4 plex would be covered under RESPA.
A loan for which of the following would NOT fall under Regulation Z? A » Residential home B » A loan involving discount points C » Shoe store in a commercial shopping strip D » A duplex CRegulation Z (truth-in-lending law) does NOT apply to commercial loans. It does apply to any residential (A) first mortgage on up to a 4-plex (D). Discount points do not affect whether or not it falls under RESPA (B).
Which of the following loans gives a borrower the lowest monthly payment? A » 8% interest, 20 year term B » 8% interest, 25 year term C » 9% interest, 20 year term D » 9% interest, 25 year term B(B) The lowest interest with the longest term will always be the lowest monthly payment.
Which of the following statements BEST describes an amortized loan with a fixed interest rate? A » Constant principal and interest payments each month B » Equal interest amounts each year C » Equal principal amounts each year D » Monthly principal and interest payments with an adjustment at the end of each year AA fixed interest rate will allow the monthly principal and interest payments to always remain the same. Also, an amortized note has payments being applied to both principal and interest (A). A straight note or term loan has equal payments being applied to interest only (B). An adjustable rate loan has adjustments to the monthly payments periodically (D).
What would be an advantage for a buyer in taking out an FHA 245 loan in purchasing a house? A » Lower interest rate B » Lower payments C » Build equity faster D » Longer term for the loan B(B) The FHA 245 is a graduated payment mortgage giving a buyer lower payments initially on a loan. The payments typically go up for 5 years and then level off for the remainder of the term. (A) An FHA 245 does not necessarily have a lower interest rate. (C) An FHA 245 does not build equity faster, rather, it builds equity slower or can have negative amortization. (D) There is not a longer term for an FHA 245 loan.
A buyer borrowed $1,500 to purchase a hot tub. If the agreement between the parties was for the total principal and interest to be repaid in a single payment, what was the interest rate on the loan if the payment was $1,695? A » 11.3% B » 11.5% C » 13.0% D » 15.0% C$1,695 principal and interest minus $1,500 principal equals interest of $195. $195 divided by $1,500 equals an annual interest rate of 13%.
In a repayment of a mortgage loan, which type of interest is used? A » Simple B » Discount C » Compound D » Floating A(A) Simple interest means that the interest is figured on the balance due after each payment. This type of interest is used for a mortgage loan. Compound interest is usually used in savings where the interest is paid out and added to the account. This then has the next interest figured on both the original amount PLUS the interest (C). Discount (B) means to sell a note for less than the face amount of the loan. Floating (D) is a type of adjustable rate mortgage.
A property was encumbered by a special assessment lien, a mortgage lien and a mechanic’s lien. On April 1st, the property owner added solar panels to the house and defaulted on the payments. If foreclosure took place, which lien would take priority? A » The mortgage lien B » The special assessment lien C » The 1st mechanic’s lien D » The solar panel lien B(B) A real estate tax lien, whether a general assessment or a special assessment, always takes priority at a foreclosure sale. (A) The mortgage lien, (C) the 1st mechanic`s lien and (D) the solar panel lien would take priority based on the effective recording date.
A person who owned a house ran into financial difficulty. Foreclosure on the house appeared to be a possibility. Which of the following actions should this person take in trying to protect the person’s credit rating in the future? A » Ask the lender for a deed in lieu of foreclosure B » Ask the lender for a deed of reconveyance C » Exercise the alienation clause in the mortgage D » Exercise the defeasance clause in the mortgage A(A) A deed in lieu of foreclosure does protect a person`s credit rating better than an actual foreclosure. (B) A deed of reconveyance is a document a lender gives to a buyer when a loan is completely paid off. (C) An alienation clause in a mortgage calls the loan balance due and payable upon selling the property. (D) The defeasance clause in a mortgage voids the security once the loan is paid off.
Which of the following parties must sign a mortgage in order for the mortgage to be valid? A » Vendor B » Vendee C » Mortgagor D » Mortgagee C(C) The mortgagor must sign as the borrower is placing property as security for a loan. (A) The vendor is a seller. (B) The vendee is a buyer – a buyer does not have to be a mortgagor, e.g., buying a property for cash. (D) The mortgagee is the lender and does NOT have to sign the mortgage.
In which way are a mortgage document and a mortgage note similar? A » Both are non-negotiable instruments B » Both are debt-reducing instruments C » Both are contracts D » Both are fully standardized instruments of conveyance C(C) A note is a contract to pay a debt. A mortgage is a contract giving the lender (mortgagee) the right to foreclose upon default. A note is a negotiable instrument (A); i.e. it can be bought and sold. A note creates (not reduces) a debt (B). The terms of both a note and a mortgage are negotiable; i.e. they are not standardized (D).
The priority of liens can be determined by all the following facts EXCEPT: A » date of recording B » amount of money involved C » type of lien D » date of performance BAmount of money is irrelevant. Date of recording (A) is the best indicator of priority. Type of lien (C) may indicate, such as a property tax lien takes priority over all other liens. Date of performance (D) may be applicable in a lien such as a mechanic`s lien.
A lien was placed on a property for electrical equipment for $2,600. There already existed a tax lien, mortgage lien and mechanic’s lien on the property. The house was foreclosed on and sold. Which of the following liens would be LAST in priority? A » Tax lien B » Mortgage lien C » Mechanic’s lien D » Electrical equipment lien D(D) Liens usually take priority based on date of recording (except for property tax liens which take priority over all other liens). Since the tax (A), mortgage (B) and mechanic`s (C) already had been recorded, the electrical equipment lien would be LAST.
A buyer put 20% down on the purchase of a house. The lender required the buyer to pay two discount points in order to obtain a loan. The buyer paid $1,000 for the discount points. What was the purchase price of the house? A » $50,000 B » $62,500 C » $75,000 D » $87,000 B$1,000 divided by 2% equals the loan amount of $50,000. The buyer putting 20% down means the loan must have been 80% of the purchase price. $50,000 divided by 80% equals the purchase price of $62,500.
Which of the following is the BEST definition of a buydown loan? A » When the buyer obtains a second mortgage, in order to lower the amount of the first mortgage on the new home B » The buyer submits a large earnest deposit to encourage the seller to accept a lower offer C » It lowers the interest rate between the 6th and 10th years D » The buyer pays a front-end payment to lower the interest rate on the loan in order to qualify D(D) A buydown is similar to discount points in that the buyer pays money up front to lower the interest rate, typically for the first few years only. This lower initial rate can help the buyer qualify for a loan. (A) A buydown is NOT a second mortgage. (B) The earnest money and buydown are separate issues. (C) The interest is lower normally for the first few years, not between the 6th and 10th years.
A lender packaged a number of loans to sell to investors. This is referred to as a type of interim financing called: A » blanket financing B » package financing C » warehouse financing D » discount financing C(C) Warehousing is the practice of holding loans for a period, then bundling them together and selling them in the secondary market. Blanket is a type of mortgage that covers more than one piece of property (usually used by developers (A). Package (B) is a mortgage covering real AND personal property. Discount (D) is to sell a note for less than its face value.
What is the basic purpose of commercial banks? A » To make short-term business loans B » To make home loans only when savings and loans refuse C » To buy loans from institutional lenders D » To make construction lenders effective A(A) Banks were originally set up to make short-term loans to business. However, today many also make long term home loans. It is not necessary to have savings and loans refuse before a bank can make a loan (B). Although banks can buy loans (C), banks are a type of institutional lender. Banks usually are the construction lender (D).
Which non-governmental organization has its greatest investment in first mortgages on single family residences? A » Insurance companies B » Commercial banks C » Savings and loans D » Federal Housing Administration C(C) Savings and loans primarily make investments in home loans. Insurance companies (A) usually make large commercial and investment loans. Commercial banks (B) make home loans but banks usually have large investments also in business loans. The Federal Housing Administration (D) is a governmental organization and only INSURES (not invests) in home loans.
A seller sold their house to a buyer and allowed the buyer to assume the seller’s loan. Which of the following would give the seller the best protection regarding this situation? A » Deed of reconveyance B » Estoppel certificate C » Mortgage release D » Novation D(D) is correct as a novation is where the seller is released from liability on the loan and the buyer becomes solely liable. (A) and (C) are documents issued when a loan is paid off by the homeowner. (B) is a certificate which states the current loan balance on loan when the loan is being sold to the secondary mortgage market.
A buyer purchased a property from a seller and assumed the seller’s loan. The seller wanted to be released from liability on the loan. Which of the following would accomplish this for the seller? A » The seller would have to sign a release of liability B » The lender would have to sign a release of liability C » The seller would need to note the release of liability in the sales contract D » The buyer would have to sign a release of liability B(B) The lender is the one who has to give a release of liability on an assumption of a loan – called a novation. (A) The seller signing a release, (C) the seller noting the release in a contract and (D) the buyer signing a release are all false as only the lender can give a release of liability on the loan.
A son and daughter-in-law wanted to buy their parents house and assume the mortgage. The son and daughter-in-law had just gone through bankruptcy. Which of the following clauses in a mortgage would prevent this sale and assumption from taking place? A » Acceleration clause B » Alienation clause C » Subordination clause D » Defeasance clause B(B) The alienation (due-on-sale) clause calls the loan balance due and payable upon the transferring of property, thereby making the loan non-assumable. (A) The acceleration clause in a mortgage calls the loan balance due and payable upon non-payment. (C) The subordination clause changes the priority of a mortgage that is different than the recording date – it`s where a lender waives their right in favor of someone else. (D) The defeasance clause is where a lender voids the security when the loan is paid off.
Seller Grant entered into a sales contract with buyer Howe. Under the terms of the agreement, Howe assumed the loan of Grant. Howe ran into financial difficulties the following year and defaulted on the loan. Under the standard assumption guidelines, who would be liable to the lender on the assumed loan? A » Howe only B » Grant only C » Both Grant and Howe D » Neither Grant nor Howe as the lender is on their own in trying to recover the money C(C) Under an assumption of a loan, the buyer is primarily liable and the seller is secondarily liable. (A) Howe only, the buyer, is not solely liable. (B) Grant only, the seller, is not solely liable. (D) Both Grant and Hower are actually liable to the lender.
A clause in a mortgage releasing the indebtedness once the loan is paid off is: A » defeasance B » subrogation C » exculpatory D » non-disturbance A(A) Defeasance is a null and void clause which states that the mortgage is void after the note has been paid. The lender usually then issues a mortgage release which is recorded. Subrogation (B) is to sign over rights to an insurance company after receiving payment for a claim. (C) The exculpatory clause is not testable. (D) A non-disturbance clause is placed in a mortgage when the lender agrees not to disturb existing leases if forced to foreclose on the landlord.
An agreement to waive prior rights in favor of another is: A » subordination B » subrogation C » subornation D » subjugation A(A) Subordination occurs when a lender who is 1st in priority agrees to be paid off only after a 2nd mortgage holder upon foreclosure. This occurs often in construction financing. Subrogation (B) is signing over rights in a claim to an insurance company after payment of a claim. Subornation (C) is not a real estate term. Subjugation (D) usually refers to a type of slavery.
Which mortgage clause allows a lender to regain their investment if a borrower does NOT pay their payment? A » Alienation B » Due on sale C » Acceleration D » Defeasance C(C) A loan accelerates and the entire loan balance becomes due upon default by the borrower. An alienation (A) is also called a due-on-sale clause (B) which makes the loan non-assumable. (D) Defeasance is a null and void clause which makes the mortgage void upon the note being paid (usually the lender issues a mortgage release).
A seller sold a house to a buyer allowing the buyer to take over the loan on a subject to basis. After two years the buyer defaulted on the loan. Who would be liable to the lender for the note? A » Seller only B » Seller’s mortgagee C » Buyer only D » Seller and buyer A(A) When buying subject to, the buyer takes over the seller`s payments but the seller is still liable to the lender for the loan. The seller would have to pay the lender and then sue the buyer for defaulting on their agreement. The seller’s mortgagee (B) is the lender and is not liable for the note. Although the buyer (C) is liable to the original seller for defaulting on the agreement, the buyer is not personally liable to the lender unless the lender allowed a formal assumption of the loan. (D) The seller only is liable, not both.
Which of the following does NOT make loans? A » The secondary mortgage market B » The federal reserve C » Savings and loans D » Commercial banks A(A) The secondary mortgage market does NOT makes loans. Rather, the secondary mortage market purchases loans that have already been made in the primary mortgage market. (B) The federal reserve makes loans to member banks, and (C) Savings and Loans and (D) Commercial Banks also make various types of loans.
The largest purchaser of home loans in the secondary mortgage market is : A » FNMA B » GNMA C » Freddie Mac D » FHA AThe Federal National Mortgage Association is the largest purchaser of home loans in the secondary market (A). The Government National Mortgage Association is a government corporation under HUD that buys mainly FHA and VA loans (B). The Federal Home Loan Mortgage Corporation primarily buys conventional loans from Savings and Loans (C). The Federal Housing Administration insures loans to lenders (D).
Which of the following organizations is the largest purchaser of mortgages in the secondary mortgage market? A » Federal National Mortgage Association (FNMA) B » Government National Mortgage Association (GNMA) C » Federal Home Loan Mortgage Corporation (FHLMC) D » Federal Housing Administration (FHA) A(A) The Federal National Mortgage Association (FNMA) is the largest purchaser of mortgages in the secondary market. (B) The Government National Mortgage Association (GNMA) and (C) The Federal Home Loan Mortage Corporation (FHLMC) are in the secondary market but are not the largest purchasers of mortages. (D) The Federal Housing Administration insures loans made by lenders.
In times of a tight money market where the money supply is short, the secondary mortgage market helps first time home buyers by: A » lowering interest rates B » providing liquidity to primary lenders C » raising required ratios on qualifying D » insisting on larger mortgage insurance premiums B(B) The secondary mortgage markets primary purpose is to buy notes from primary lenders, thus providing liquidity for the lenders. This results in lenders being willing to make loans in a time of tight money as the lender knows the loans can be sold to the secondary mortgage market, thus keeping the lender supplies with loan money – hence the answer is (B). (A) is incorrect as the federal reserve involves itself with lowering interest rates if necessary, not the secondary mortgage market. (C) and (D) would hinder borrowers.
Which of the following is NOT a purpose of the secondary mortgage market? A » To help banks determine how much money to keep on hand B » To free up money so lenders can make loans C » To provide liquidation for investment loans D » To help lenders in times of a tight money market AThe “secondary” market is the place where existing notes are bought and sold. It does not have anything to do with how much cash a lender keeps on hand. It does free up money as the secondary lender gives the primary lender (bank) cash in return for the loan (B). It does turn investments into liquid assets as it allows for loans to be sold (C). In tight money times, it allows lenders to get cash in return for paper (notes).
Which of the following statements is true about the Federal National Mortgage Association (FNMA)? A » It sells bonds to raise money to buy notes B » It makes loans to low income borrowers C » It is a government corporation D » It is an agency of HUD A(A) Fannie Mae sells government guaranteed securities in order to raise money to buy notes from lenders. FNMA does not make loans directly to borrowers (B). FNMA is a private government sponsored enterprise (not government agency) (C) & (D).
Under which of the following circumstances would one MOST likely see an estoppel certificate? A » A lender sells a loan and the new mortgagee wants to know the existing balance B » A lender attempts to prevent a loan assumption to an unqualified party C » A developer attempts to have a parcel released from under a blanket mortgage D » A lender calls for full payment of a note A(A) Estoppel certificates are loan statements signed by a borrower that indicate that the lender and borrower both agree as to the terms and balance owed on a loan. It is usually done when the original mortgage holder (bank) sells the note to another lender. The new lender wants to make sure that the borrower is in agreement about the loan with the lender. Due-on-sale clauses prevent a loan assumption (B). A partial release clause allows parcels to be released from a blanket mortgage if sold (C). Acceleration (D) allows a note to be called due.
A couple bought a property for $100,000 obtaining an 80% loan. The land value was $15,000. What would the mortgagee require for hazard insurance? A » $ 80,000 B » $ 85,000 C » $ 95,000 D » $100,000 A(A) The mortgagee is the lender. As such, the lender wants to make sure there is enough hazard insurance to cover the loan balance. Therefore, $100,000 price times 80% equals $80,000 for the loan to be covered by insurance.
What type of loan is quickest for the buyer? A » Conventional B » FHA C » VA D » Assumption D(D) Since no new mortgage must be originated, assuming the seller`s existing loan is very quick. Conventional (A), FHA (B) and VA (C) all would require making a new mortgage.
When an FHA 203B loan is obtained, which generally happens? A » An FHA appraiser appraises the property B » There is a maximum of 20 years allowed for the loan term C » FHA will guarantee a maximum of $27,500 in case of default D » FHA loans will normally allow the buyer to obtain a 2nd mortgage to cover the down payment A(A) On FHA loans, an FHA approved appraiser must estimate the value for loan purposes. FHA allows different loan terms, such as 20 or 30 year loans (B). FHA insures rather than guarantees (C). Normally the borrower must have the down payment in cash, not a second mortgage (D).
Which of the following statements BEST describes the purpose of FHA? A » To loan money for first mortgages B » To loan money for second mortgages C » To act as an insurance company on first mortgages D » To loan money in areas of high risk C(C) FHA only INSURES (not loans) money. FHA insures loans for borrowers with low down payments. (A), (B) and (D) all state that the FHA actually loans money.
What can the VA require a veteran do when applying for a loan? A » Make the down payment directly to the VA B » Make a down payment in cash C » Make the veteran immediately assume liability for the VA guaranty amount D » NOT allow the veteran to make prepayments on the principal amount C(C) If a veteran obtains a VA loan, the veteran must be liable. The veteran cannot just walk away and assign liability to another. There is no down payment required (A) & (B). If the veteran makes a down payment, it would be applied against the sale price, not paid to the VA. A veteran is allowed to pre-pay the loan (D),
A borrower applied for a VA guaranteed first time mortgage for $50,000. However, the property appraised for $46,000. If the buyer still wished to buy the property, which could happen? A » The broker could write up a different contract for a different sale price to take to the lender that is different from the actual contract B » The VA could allow the borrower to make up the difference in cash C » The VA could make the seller carry a second mortgage for the difference D » The veteran could not get a VA loan because it appraised for over $35,000 B(B) VA borrowers can pay more than the appraised value. However, the borrower must pay the difference in cash. Writing false contracts (A) is illegal bank fraud. The seller can NOT be made by the VA to carry a second mortgage (C). Most VA loans are for far more than $35,000 (D).
A single parent who receives child support payments is applying for a loan to purchase a house. The parent MUST disclose the child support to the lender if:A » applying for an FHA or VA loan B » gross income is less than $25,000 per year C » the child support exceeds 50% of income D » the child support will be considered as a basis for the payments D(D) The only time ANY income must be revealed to a lender is if the borrower wants the lender to consider that income in determining whether the loan can be repaid. FHA and VA (A) have no special disclosure requirements regarding child support. Income (B) is not relevant nor is the amount of child support (C).
A buyer bought a house for $40,000. In order to get the buyer a larger loan, the broker wrote up a false contract for $48,000. Would this be legal? A » Yes, as long as the buyer and seller both agreed B » Yes, since the lender would base the loan on the appraisal, not the contract C » No, because the seller would NOT be a party to the false contract D » No, because the loan must be based upon the actual contract sale price D(D) Writing a false contract in order to borrow money is bank fraud. Anything other than the actual sale price is fraudulent. Even if the buyer and seller agreed (A) & (C), it is still fraud. Although the lender will consider the appraisal, the sales contract price is an important factor in considering whether or not to grant the loan (B).
A lender, in qualifying a buyer for a loan, would use a: A » debt to liability ratio B » debt to equity ratio C » debt to income ratio D » cash on cash ratio C(C) A debt to income rate is used in qualifying a buyer for a loan. The other ratios do NOT involve qualifying a buyer. (D) A cash on cash rate of return is used on commercial properties; this is the cash received divided by the cash invested.
A person increased the monthly mortgage payments to a lender with all the increases in payments being applied to the principal loan balance. Which of the following terms best describes this type of payment plan? A » Partially amortized with a balloon B » Growing equity mortgage C » Straight note D » Term loan B(B) A growing equity mortgage is where a borrower makes extra payments to principal each month, thereby increasing or growing the equity. (A) A partially amortized with a balloon is where payments are applied to both principal and interest but leaves a balance at the end of the loan term which is then paid off with a balloon payments. (C) & (D) A straight note and a term loan are the same thing; interest only payments are made each month.
A borrower who had repaid a portion of the original loan could borrow those funds again without rewriting the original terms of the note under which of the following types of mortgages? A » Package B » Blanket C » Wraparound D » Open end D(D) An open end is much like a secured line of credit that allows the borrower to reborrow funds that have already been repaid on the original note. Package (A) mortgages use BOTH real and personal property as security. A blanket mortgage (B) covers more than one piece of real estate. A wraparound (C) mortgage occurs when a lender assumes a first mortgage, advances additional funds to the borrower, writes a second mortgage which includes the first and the additional funds, collects on the second and then pays on the first.
How would a construction loan differ from a VA or FHA loan on an existing home? A » A construction loan cannot be amortized B » A construction loan is generally a higher risk than a residential loan C » A construction loan can NOT have discount points D » A construction loan usually does have discount points B(B) Construction loans are high risk since the security (i.e. the building) is not actually built yet. Many are short term straight (interest only) notes, but can be amortized (principal AND interest paid in payments) (A). Although most do not have discount points, they certainly can (C) & (D).
From a lender’s point of view, which is the riskiest type of loan? A » Conventional B » Purchase money C » Construction D » Wraparound C(C) Since the property is not completely built, a construction loan is very high risk. Upon foreclosure, the lender would have to finish building the property before it could be sold. (A) A conventional mortgage is low risk since it has a high down payment. A purchase money mortgage (B) is where the seller finances it to the buyer (so a lender is not involved). (D) A wraparound mortgage is a second mortgage (therefore fairly secure) that includes a first mortgage amount plus additional funds. The lender then pays on the first mortgage.
Finance Flashcards

FINC 412 CH 22

____ finance companies concentrate on purchasing credit contracts from retailers and dealers. Consumer
Which of the following is not a source of finance company funds to support operations? federal funds
When a finance company’s assets are ____ interest rate sensitive than its liabilities and when interest rates are expected to ____, bonds can provide longterm financing at a rate that is completely insulated from rising market rates. less; increase
Finance companies differ from commercial banks, savings institutions, and credit unions in that they normally do not obtain funds from deposits.
Which of the following is not a main source of funds for finance companies? capital
Finance companies are more likely to issue bonds when their assets are presently ___ interest rate sensitive than their liabilities, and when interest rates are expected to ____. less; increase
If finance companies were confident about projections of ____ interest rates, they may consider using the funds obtained from issuing bonds to offer loans with ____ rates. rising; variable
Finance companies would prefer to increase their longterm debt most once interest rates have declined.
The main competition for finance companies in the consumer loan market comes from commercial banks and savings and institutions.
When finance companies purchase a firm’s receivables at a discount, and are responsible for processing and collecting the balances of these accounts, they act as a factor.
When a finance company purchases equipment for use by another business, the finance company provides financing in the form of leasing.
Finance companies are subject to ceiling interest rates on loans provided.
If finance companies with a greater ratesensitivity of liabilities than assets wanted to reduce interestrate risk, they could shorten their average asset life.
Compared to other lending financial institutions, finance companies have a ____ loan delinquency rate, and the average rate charged on loans is ____ on average. higher; higher
A wholly owned subsidiary whose primary purpose is to finance sales of the parent company’s products and services, provide wholesale financing to distributors of the parent company’s products, and purchase receivables of the parent company is a captive finance subsidiary.
Which of the following statements is incorrect? a. A captive finance subsidiary’s purpose is to finance sales of the parent company’s productsand services.b. An operating agreement between the parent and the captive specifies the type of receivablesthat qualify for same and specific services provided by the parent.c. A captive can be used to finance distributor or dealer inventories until a sale occurs.*d. A captive is rarely used to finance products leased to others.*
____ provide loans to firms that cannot obtain financing from commercial banks. Commercial finance companies
Which of the following is not a use of finance company funds? commercial paper
Finance companies commonly act as ____ for accounts receivable; that is, they purchase a firm’s receivables at a discount and are responsible for processing and collecting the balances of these accounts. factors
Most finance companies are commonly exposed to all forms of risk below except ____ risk. exchange rate
Changes in economic growth are ____ related to a finance company’s cash flows, and changes in the risk free rate are ____ related to a finance company’s cash flows. positively; negatively
Finance companies participate in the ____ market to reduce interest rate risk. swap
The most important risk for finance companies is ____ risk. credit
Finance companies can accumulate capital by doing all of the following except issuing commercial paper.
Consumer finance companies primarily focus on for consumer loans.
Historically, captive finance subsidiaries were associated with: the automobile industry.
Finance Flashcards

Finance Exam 2

A demand deposit is also known as A checking account.
A credit card is a type of Loan/borrowing.
A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as A trust
When you select a financial services provider, you should ask all of the following questions except All of the above
All of the following are deposit institutions except A finance company.
Which of the following will likely provide the most expensive loans? A payday loan company
A drawback of a regular savings account is A low rate of return.
Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar cds, and at other times, his earnings are lower. He purchased a Indexed CD.
Which of the following is correct about inflation? In order to increase buying power, you need to earn a rate higher than the rate of inflation.
Which of the following refers to the opportunity to withdraw your money on short notice without incurring a loss in value? Liquidity
Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use? A debit card.
Shelby has an account at a financial institution that will waive the monthly fee if she keeps a certain amount in savings. What kind of account does she have? A regular checking account.
Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a Certified check.
Logan paid a bill with a special form. He received this form at his financial institution and had to pay the amount of the check plus a fee. He used a Cashier’s check.
Zoe signed the back of her check with the words “for deposit only.” She used a(n) Restrictive endorsement.
If a check is lost or stolen, you should use a Stop-payment order.
What is the APY for a one-year $4,000 certificate of deposit with $280 interest? 7%
Opal earned 6% in her savings account. If she is in the 25% tax bracket, what is her after-tax savings rate of return? 4.5%
Gwen had three accounts as listed here. In 2014, how much was her total insurance coverage by the FDIC?• Bank A: $250,000• Bank B: $50,000• Bank C: $300,000 $550,000
Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin’s actual rate of return on the loan? 4%
Paul borrowed $200 to be repaid in one year. He paid 10% interest and a service charge of $3.00. What is his finance charge? $23.00
Timothy Carter has net monthly income of $3,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,200, and a credit card minimum payment of $45. What is his debt-payments-to-income ratio? 14.3%
If Vince charged $200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay? $200.00
Timothy Carter went out to eat with his girlfriend at a fancy restaurant. When he tried to pay the bill with his Mastercard credit card, he was told that the restaurant accepted only cash or American Express. His waiter suggested that he use the ATM across the street to withdraw cash using his credit card. Tim did as suggested and didn’t pay attention to any fees until he received his credit card statement one month later. He was shocked to see the total fees (3% cash advance), and his APR was increased to 21%. Given the cost of the meal ($125) plus the associated fees, how much did his meal cost him? $130.94.
Under Chapter 7 of the U.S. bankruptcy code, Certain assets receive some protection.
All of the following are warning signs of debt problems except You pay your credit card bills in full each period.
All of the following are consumer credit protection laws except The Credit Lawsuit Act
Who is responsible for a loan repayment? The cosigner and/or the borrower
If you think your identity has been stolen, which of the following actions does the Federal Trade Commission recommend you take immediately? File a police report.
Which of the following is often the first sign of a stolen identity? You receive bills for a credit card account you never opened.
Which of the following acts sets procedures for promptly correcting billing mistakes, refusing to make credit card or revolving credit payments on defective goods, and promptly crediting your payments? Fair Credit Billing Act of 1975
The minimum monthly payment on a credit card is The smallest amount you can pay and remain a borrower in good standing.
Sam is comparing the costs of two loans. The principal amount of each loan is $5,000. One is due in one year and the other is due in four years. Both have the same stated rate of annual interest. Which of the following is true? The interest charges for the one-year loan will be lower than the interest charges for the four-year loan.
The APR is the percentage cost of credit on a(n) ______________ basis. Yearly
The finance charge for credit includes all of the following except The amount borrowed.
If you are denied credit, You are entitled to a free copy of your credit report.
Credit files can include all of the following except Race or nationality.
Credit bureaus get their information from all of the following sources except References.
Which of the following is NOT a valid credit application question? All of the above
A partial refund of the price of a product is called a Rebate
Steve bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop? Full warranty
Frank bought some miniblinds. Although he did not receive a written warranty, the blinds should be expected to open and close properly. What kind of warranty does Frank have? Implied warranty
The text identifies several phases in the research-based buying process. The correct order of the phases is Preshopping activities, evaluating alternatives, selection and purchase, postpurchase activities.
While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except All of the above
Buying a vehicle can be a challenging process. When researching a vehicle, a consumer may want to consider all of the following vehicle options except All of the above
The appearance of a used car can be deceptive. When purchasing a used vehicle, it is a good idea to Have a trained and trusted mechanic of your choice check out the vehicle.
Which of the following is a disadvantage of a car lease? At the end of the lease, you have no ownership interest in the vehicle.
The amount printed on a label with the suggested retail price that is posted on a vehicle is called the Sticker price.
A vehicle lease has several costs. Which of the following is the interest rate used to calculate the monthly cost? Money factor.
A vehicle lease has several costs. Which of the following is the expected value at the end of the lease? Residual value
The lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time, you may end up owing more than the car is worth, which is called Negative equity.
A variable operating cost for a vehicle is Maintenance and repairs.
The largest fixed expense associated with a new automobile is Depreciation.
Think about consumer complaints. Which of the following is correct? If you don’t get satisfaction from working with the company headquarters, you may get assistance from a mediator in order to avoid legal action.
This provides the tenant protection from rent increases. Lease
Georgina and Henry have a family and are looking at houses. Which of the following is correct? They should assess the school system in the area they want to live.
Kelly selected a home and submitted an offer to the seller. The seller may reject the offer and choose to provide a counteroffer.
Major factors that affect the affordability of your mortgage include all of the following except Size of the home
Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except Expected maintenance costs.
If you do not pay back any of the loan amount for a portion of the loan period, you have a(n) Interest-only mortgage.
During the closing for a home purchase , you should Pay all closing costs, settle last-minute details, and sign documents
Brett bought a house five years ago for $150,000. At that time he borrowed $140,000 from his bank. The house is now worth $162,000. The current value of his mortgage must be no higher than — for him to request termination of his PMI policy. $126,360.
Jordan earns an annual salary of $45,000. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum mortgage that Jordan can apply for? $1,237.50
Jim wants to make an offer to buy an older house. At this point, he should Set up a home inspection.
Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called Points
Trenton wants to buy a house but can provide only a 10% down payment. He probably will be required to have PMI
The primary benefit of a home equity loan is The deductibility of the loan interest on federal taxes.
A reverse mortgage Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies.
Alex is buying a new house. First Home Mortgage is providing the financing through a 30-year loan for $ 220,000. Estimate the monthly payment if the interest rate is 4.8% fixed. $ 1,154
Alex is buying a new house. First Home Mortgage is providing the financing through a 15-year loan for $ 180,000. Estimate the total amount of interest paid at the end of the loan if the interest rate is 3.6% fixed. $ 53,216
Finance Flashcards

chapter 3 finance

27) A firm’s annual stockholders’ report ________. B) summarizes and documents the firm’s financial activities during the past year
28) The rule-setting body, which authorizes generally accepted accounting principles is the ________. B) FASB
29) Accounting practices and procedures used to prepare financial statements are called ________. C) GAAP
30) The federal regulatory body governing the sale and listing of securities is called the ________. D) SEC
31) The stockholders’ annual report must include ________. B) an income statement
32) The 2002 Sarbanes-Oxley Act was designed to ________. B) eliminate the many disclosure and conflict-of-interest problems of corporations
33) The 2002 law that established the Public Company Accounting Oversight Board (PCAOB) was called ________. D) the Sarbanes-Oxley Act
34) The Public Company Accounting Oversight Board (PCAOB) ________. A) is a not-for-profit corporation that oversees auditors of public corporations
35) The stockholder’s report includes ________. D) a statement of retained earnings
36) Total assets less net fixed assets equals ________. B) current assets
37) A(n) ________ provides a financial summary of a firm’s operating results during a specified period. A) income statement
38) Gross profit is ________. D) sales revenue minus cost of goods sold
39) Operating profit is ________. A) gross profit minus operating expenses
40) Net profit after taxes is ________. D) EBIT minus interest and taxes
41) Operating profit is known as ________. B) earnings before interest and taxes
42) Earnings available for common stockholders is calculated as net profits ________. B) after taxes minus preferred dividends
43) Which of the following is a current liability? C) notes payable
44) Which of the following represents a current asset? C) marketable securities
45) Which of the following is a fixed asset? A) land
46) The net value of fixed assets is also called its ________. C) book value
47) Retained earnings on the balance sheet represents the ________. D) cumulative total of all earnings reinvested in the firm
48) The ________ represents a summary statement of a firm’s financial position at a given point in time. B) balance sheet
49) The statement of cash flows ________. C) provides insight into a firm’s operating, investment, and financing cash flows
50) When preparing the retained earnings statement, ________ is(are) subtracted in order to derive at the ending balance of retained earnings. D) dividends
54) On the balance sheet, net fixed assets represent ________. C) gross fixed assets at cost minus accumulated depreciation
55) Paid-in capital in excess of par represents the amount of proceeds ________. B) in excess of the par value from the original sale of common stock
56) Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000, and preferred dividends of $5,000. What was the firm’s net profit after taxes? B) $49,000
57) Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent, and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding and no interest expense. What was Candy Corporation’s earnings per share? C) $7.42
58) A firm’s year-end retained earnings balances are $670,000 and $560,000, for 2014 and 2015 respectively. The firm paid $10,000 in dividends in 2015. The firm’s net profit after taxes in 2015 was ________. A) -$100,000
59) A firm’s year-end retained earnings balances are $320,000 and $400,000, for 2014 and 2015 respectively. The firm reported net profits after taxes of $100,000 in 2015. The firm’s dividend payment for 2015 is ________. B) $20,000
60) A firm has a year-end retained earnings balance of $220,000 for 2014. The firm reported net profits after taxes of $50,000 and paid dividends of $30,000 in 2015. The firm’s retained earnings balance at 2015 year end is ________. A) $240,000
61) A firm’s year-end retained earnings balance are $670,000 and $560,000 for 2014 and 2015, respectively. The firm reported net profits after taxes of $100,000 in 2015. The firm paid dividends of ________ in 2015. D) $210,000
62) Information on the accounting policies, procedures, calculations, and transactions underlying entries in the financial statements can be found on ________. A) the notes to the financial statements
63) FASB Standard No. 52 mandates that U.S.-based companies must translate their foreign-currency-denominated assets and liabilities into dollars using the ________. B) current rate
18) Ratios provide a ________ measure of a company’s performance and condition. C) relative
19) Present and prospective shareholders are mainly concerned with a firm’s ________. A) risk and return
20) The primary concern of creditors when assessing the strength of a firm is its ________. C) short-term liquidity
21) ________ analysis involves the comparison of different firms’ financial ratios at the same point in time. B) Cross-sectional
22) ________ analysis involves comparison of current to past performance and the evaluation of developing trends. A) Time-series
23) Which of the following is used to analyze a firm’s financial performance over different years? A) time-series analysis
24) Which of the following is true of benchmarking? B) It is an analysis in which a firm’s ratio values are compared with those of a key competitor or with a group of competitors that it wishes to emulate.
25) Cross-sectional ratio analysis is used to ________. D) measure relative performance of a firm with its peers
26) Time-series analysis is often used to ________. A) assess developing trends
27) In ratio analysis, a comparison to a standard industry ratio is made to isolate ________ deviations from the norm. B) negative
28) Which of the following is a limitation of ratio analysis? B) Ratios that reveal large deviations from the norm merely indicate the possibility of a problem.
29) An analyst should be careful when conducting ratio analysis to ensure that ________. A) the overall performance of a firm is not judged on a single ratio
30) The analyst should be careful when analyzing ratios that ________. B) right interpretation of the ratio value is made
31) Inflation can distort ________. A) book value of inventory costs
32) Without adjustment, inflation may tend to cause ________ firms to appear more efficient and profitable than ________ firms. B) older; newer
33) Which of the following groups of ratios primarily measure risk? C) liquidity, activity, and debt
34) The ________ ratios are primarily used as measures of return. D) profitability
12) The ________ of a business firm is measured by its ability to satisfy its short-term obligations as they come due. B) liquidity
13) The two categories of ratios that should be utilized to assess a firm’s true liquidity are the ________. D) liquidity and activity ratios
14) The two basic measures of liquidity are ________. B) current ratio and quick ratio
15) A firm has a current ratio of 1; in order to improve its liquidity ratios, this firm might ________. C) decrease current liabilities by utilizing more long-term debt, thereby increasing the current and quick ratios
16) If the only information you are given about Ryan Corporation, a large public company in business for many years, is that it has a current ratio of 2.9, what could you infer from this? A) It can meet the short-term obligations without any difficulty.
17) Which of the following is true of current ratio? D) A higher current ratio indicates a greater degree of liquidity.
18) Which of the following is excluded when calculating quick ratio? D) inventory
19) ________ ratios are a measure of the speed with which various accounts are converted into sales or cash. A) Activity
20) Nico Corporation has cost of goods sold of $300,000 and inventory of $30,000, then the inventory turnover is ________ and the average age of inventory is ________. B) 10; 36.5
21) ________ may indicate a firm is experiencing stockouts and lost sales. B) Inventory turnover ratio
22) If an inventory turnover is divided into 365, it becomes a measure of ________. B) the average age of the inventory
23) The ________ measures the activity, or liquidity, of a firm’s stock of goods. B) inventory turnover ratio
24) A(n) ________ is useful in evaluating credit policies. C) average collection period
25) The ________ ratio may indicate poor collections procedures or a relaxed credit policy. C) average collection period
26) ABC Corp. extends credit terms of 45 days to its customers. Its credit collection would likely be considered poor if its average collection period was ________. D) 57 days
27) Which of the following ratios is difficult for the creditors of a firm to analyze from the published financial statements? B) average payment period
28) Nico Corporation has annual purchases of $300,000 and accounts payable of $30,000, then average purchases per day are ________ and the average payment period is ________. C) 821.9; 36.5
29) ________ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm. C) Lenders and suppliers
30) The ________ ratio indicates the efficiency with which a firm uses its assets to generate sales. B) total asset turnover
32) A firm with a total asset turnover that is lower than industry standard but with a current ratio that meets industry standard must have excessive ________. A) fixed assets
33) A firm with a total asset turnover lower than industry standard may have ________. C) insufficient sales
8) ________ is a term used to describe the magnification of risk and return introduced through the use of fixed-cost financing, such as preferred stock and debt. A) Financial leverage
9) ________ ratio measures the proportion of total assets financed by the firm’s creditors. D) Debt
10) ________ ratio measures a firm’s ability to pay contractual interest payments. A) Times interest earned
11) ________ ratio indicates that a firm will be able to meet interest obligations due on outstanding debt. D) Times interest earned
12) The higher, the value of ________ ratio, the better able a firm is to fulfill its interest obligations. C) times interest earned
13) When assessing the fixed-payment coverage ratio, ________. A) the lower its value the more risky is the firm
6) Two frequently cited ratios of profitability that can be read directly from the common-size income statement are ________. D) the gross profit margin and the net profit margin
7) The ________ is a popular approach for evaluating profitability in relation to sales by expressing each item on the income statement as a percent of sales. C) common-size income statement
8) ________ indicates the percentage of each sales dollar remaining after the firm has paid for its goods. C) Gross profit margin
9) ________ measures the percentage of profit earned on each sales dollar before interest and taxes but after all costs and expenses. B) Operating profit margin
10) A firm with a gross profit margin which meets industry standard and a net profit margin which is below industry standard must have excessive ________. A) general and administrative expenses
11) ________ measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted. A) Net profit margin
12) ________ measures the overall effectiveness of management in generating profits with its available assets. D) Return on total assets
13) ________ measures the return earned on the common stockholders’ investment in the firm. C) Return on equity
14) A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000, and common stockholders’ investment of $750,000 has a return on equity of ________. D) 4 percent
15) A ________ ratio is commonly used to assess owners’ appraisal of the share value. B) price/earnings
16) P/E ratio measures the ________. A) market value of the stock to earnings per share
17) Book value per share is the ratio of ________. A) common stock equity to number of outstanding common shares
4) The DuPont system merges the income statement and balance sheet into two summary measures of profitability, ________. C) return on total assets, and return on common equity
5) The ________ is used by financial managers as a structure for dissecting a firm’s financial statements to assess its financial condition. B) DuPont system of analysis
6) In the DuPont system of analysis, the return on total assets (asset) is equal to ________. D) (net profit margin) × (total asset turnover)
7) The modified DuPont formula relates the firm’s return on total assets (ROA) to its ________. A) return on equity (ROE)
8) In the DuPont system of analysis, the return on equity is equal to ________. C) (return on total assets) × (financial leverage multiplier)
9) A firm with a low net profit margin can improve its return on total assets by ________. B) increasing its total asset turnover
10) Other things being equal, a decrease in total asset turnover will result in ________ in the return on total assets. B) a decrease
11) A firm with a low return on total assets can improve its return on equity, all else remaining the same, by ________. A) increasing its debt ratio
12) The three basic ratios used in the DuPont system of analysis are ________. C) net profit margin, total asset turnover, and equity multiplier
13) The financial leverage multiplier is an indicator of how much ________ a corporation is utilizing. C) total debt
14) Financial leverage multiplier is the ratio of ________. B) total assets to common stockholders’ equity
15) Using the DuPont system of analysis, holding other factors constant, an increase in financial leverage will result in ________. A) an increase in the return on equity
30) As the financial leverage multiplier increases, this may result in ________. C) a decrease in the net profit margin and return on investment, due to the increase in interest expense as debt increases
Finance Flashcards

Consumer Finance 14 & 15

The ________ is the date when the bond issuer returns the face value to the bondholder and terminates the bond. maturity
How do bonds differ from investing in common stock? Bonds generally provide a better stream of income than common stock.
T/F For an investor with a goal of capital gains, a bond is a good investment choice. FALSE
The bond you own was issued by IBM Corporation and used no collateral. This is an example of a(n) ________. Debenture
If you were considering the purchase of a bond issued by a state, county, or city you would be considering the purchase of a ________. muni
Which of the following bonds would pay the highest risk premium on their returns? Junk bonds
T/F U.S. Government securities are considered to be the safest investment in the world. TRUE
A bond rating is really a measure of a bond’s ________. riskiness
T/F All Mutual Funds carry the same level of diversification and exposure to risk. FALSE
Which of the following is not a disadvantage to mutual fund investing? (3) 1. On average they underperform the market returns.2. Costs may be high and are the same from fund to fund.3. You cannot diversify away systemic risk.4. Not all mutual funds are truly safe.(Correct) 5. All of the above are disadvantages to mutual fund investing.
Which of the following is a benefit to investing in a Mutual Fund? (3) 1. Most small investors don’t buy or sell enough stock to be able to justify the sales commissions on their trades which makes diversification unrealistic.2. Most small investors want to be able to invest relatively small amounts of money on a regular basis.3. Most small investors don’t have the time, knowledge or desire to do the research necessary to purchase individual stocks.
T/F Most Mutual Fund investments are illiquid. FALSE
T/F 12b-1 fees are marketing expenses for the mutual fund that are passed on to the fund shareholders. TRUE
T/F By law, all mutual funds must charge the same fees and expenses. FALSE
T/F Mutual funds with a high turnover ratio may have complicated tax implications for shareholders. TRUE
T/F Exchange traded funds are mutual funds that trade on an exchange just like individual securities and can be bought or sold throughout the trading day. TRUE
Which of the following funds would be appropriate for an investor who is retired and looking for income? Bond Funds
What are the differences between an ETF and a mutual fund? (3) 1. An ETF can be traded like a share of common stock2. An ETF is less complicated concerning tax liability3. An ETF can be purchased on margin or sold short like a share of common stock
Which of the following mutual fund services is similar in concept to compounding and the time value of money? automatic reinvestment
T/F Mutual Funds make investing so easy you don’t even need to determine what your investing goals and timelines are. FALSE
Finance Flashcards

Texas Government test 3 (Chapters 5 & 6)

In modern elections, candidates increasingly rely on which of the following to communicate information to voters? Social media such as Facebook and Twitter
Most voters in Texas learn about candidates for office through television ads
According to studies, negative commercials draw voter preference away from the candidate being attacked
Organizations created to collect and distribute contributions to political campaigns are referred to as political action committees
Which of the following statements regarding the Campaign Reform Act of 2002 is false? none of its provisions have been overturned by the Supreme Court
In which case did the Supreme Court overturn a ban on unlimited independent expenditures made by corporations, unions, and nonprofit organizations in federal elections? Citizens United v. Federal Election Commission (2010)
Independent, expenditure-only committees that may raise unlimited sums of money to support or oppose political candidates are known as ​​SuperPACs
Which of the following is not true of Texas campaign finance regulations for state offices? There are no disclosure requirements by candidates
Texas’s Latino and African American populations combined comprise more than half of the state’s total population
​La Raza Unida Party was founded by several Latino leaders in order to field candidates for office and mobilize Mexican-American voters
Which of the following is the most likely reason that La Raza Unida did not continue to be politically effective? The Texas Democratic Party has adopted issues appealing to Hispanic voters
By 2015, Texans had elected Latino candidates to which offices? The state Supreme Court, U.S. Senate, U.S. House, and Texas legislature
What percentage of Texas’s African American citizens say that they are Democrats? 80 percent
Prior to 1990, how many women had been elected to statewide office in Texas?​ 4
The first openly gay mayor of a major U.S. city was Annise Parker, sworn in as mayor of Houston in 2010
The increased presence of women in policymaking positions has resulted in such changes as increased punishments for family violence and sexual abuse of children
Which of the following is not a reason that fewer women than men seek elected office? Women are not allowed to run for elected office unless they have completed a graduate degree
The principal political activity of most Texans consists of voting in elections
The ability of almost all citizens 18 years of age and older to vote is referred to as universal suffrage
Literacy tests were implemented to ensure minorities could not vote
Protection of the right to vote for African Americans was the intention behind which amendments to the U. S. Constitution? Fourteenth and Fifteenth
In the U.S. Supreme Court case of Guinn v. United States (1915), the court ruled that the grandfather clause was illegal
Which of the following was not a device used in Texas to prevent many lower-income persons and blacks from voting after the Civil War? Grandfather clause
Which U.S. amendment prevents states from requiring payment of a poll tax as a condition for voting? Twenty-Fourth Amendment
Why was the white primary so effective at preventing minorities from exercising their right to vote? White Democrats nominated white candidates who virtually always won the general elections in the south
In the case of Smith v. Allwright, the U.S. Supreme Court overturned the white-only primary elections in Texas
Manipulating legislative district lines to favor a political party or group is referred to as gerrymandering
In which of the following cases did the Supreme Court disallow racial gerrymandering? Shaw v. Reno (1993)
In Texas, the responsibility of redistricting rests with the state legislature
As a result of the Shelby v. Holder case, the state of Texas is no longer required to obtain preclearance from the U.S. Department of Justice for its electoral district maps
Which of the following are not now required by the Voting Rights Act of 1965 and its subsequent amendments? A formula for determining which jurisdictions need preclearance from the U.S. Department of Justice
A political district from which two or more representatives are elected is an at-large majority district
The amendment to the U.S. Constitution that prohibited the states from denying the vote due to race was the Fifteenth Amendment
Which of the following amendments to the U.S. Constitution broadened the franchise, extending the right to vote to new groups? Fifteenth, Nineteenth, and Twenty-Sixth
The primary purpose of the National Voter Registration Act of 1993 (Motor Voter Law) was to require states to make voter registration available at driver licensing, military recruitment, welfare, and disability offices
Which of the following accurately describes trends in suffrage in the United States? Voting rights have steadily expanded and there has been a movement toward uniformity of voting policies among states
Compared to the rest of the country, voter turnout in Texas is lower than the national average
Low voter turnout in Texas is attributed to all of the following, except the repeal of laws that expanded suffrage
Of the various socioeconomic factors that influence voter turnout, which is considered the strongest? Education
Among the key factors that affect voter turnout are income, age, gender, and ethnicity
In order to be qualified to vote in Texas, one must meet all of the following qualifications except be a two-year resident of the state
A Texas citizen’s status as a registered voter is suspended if she changes her permanent address to another county and fails to notify the voting registrar within three years
Which of the following would not be eligible to vote in Texas? A person who has been declared mentally incompetent by a court of law
According to a recent change in the law in Texas, voters must show a valid photo ID in order to cast a ballot
Early or absentee voting in Texas for general elections begins how many days prior to the actual date of the election? 17 days
The basic geographic area for conducting national, state, district, and county elections is the voting precinct
Voting precincts in the 254 Texas counties are drawn by the county commissioners courts
Preparing the official ballot for general elections is done by the county clerk or elections
Which type of voting system is no longer used by any Texas counties? Punchcard ballots
A major requirement of the 1975 extension of the Voting Rights Act is that ballots in all Texas counties must be bilingual
An election in which party members choose a candidate to run for office in a general election is a primary election
The purpose of a general election is to elect officeholders
In order to obtain a primary nomination in Texas, a candidate must receive what part of the popular vote? An absolute majority
A primary system in which voters must declare their party affiliation when they register to vote is referred to as a(n) closed primary
The main reason for the development of direct primaries was decreasing the domination of party bosses and allowing more participation by party members
The Texas Election Code requires that primary voters declare their party affiliation at the time of voting in the party’s primary
The practice of many Texans of voting in the Democratic primary and then voting Republican at the general election is called crossover voting
Normally, the first primary election in Texas is held on the first Tuesday in March of even-numbered years
Political parties in Texas are required to conduct direct primaries if they received 20 percent or more of the votes in the most recent gubernatorial election
The cost of primary elections in Texas is paid for by filing fees charged to candidates, subsidized by state funds
The date of general elections in Texas is the first Tuesday following the first Monday in November of even-numbered years
For a candidate to win a general election, she must receive a ________ of the total votes cast plurality
The term midterm election refers to those general elections held in non-presidential election years
If a candidate wins a plurality but not a majority of votes cast in a special election in Texas, a runoff contest between the two top contenders must be conducted
In Texas, special elections are called to fill interim vacancies in legislative and congressional districts
The most common way that Americans get their news is ​from conversations
The media source from which most Texans now get their news is ​television
Once the nation’s main source of news, newspapers have declined because ​of competition from television and the Internet
Which of the following is not true of the 404 non-daily newspapers being published in Texas in 2012​? They are influential in state politics because they are read by elites
Which of the following is not true of newsmagazines? ​There are more newsmagazines than there are newspapers, and they are read by more people
Despite their relative decline, why are the print media still important sources of information? ​They cover stories in more detail, inform the elite, and remain the largest gatherers of news
Which of the following are more likely to require that ​stories be vetted for accuracy and to attempt to follow standards of objectivity? major print media
Which of the following best describes the status of radio as a news source in America? Ninety-nine percent of American homes have at least one radio, but radio has limited value as a source of political news
​What happened when the Federal Communications Commission (FCC) abolished the Fairness Doctrine in 1987? Conservative talk-radio hosts quickly outpaced liberals
Who became talk radio’s most syndicated host in the 1990s? ​Rush Limbaugh
Which of the following is true of public radio stations like KERA and KUHT? They provide substantial coverage of local, state, and national news
Commercial television began in Texas ​after World War II
Which television news format is most used by the public? Cable news
Websites and computer applications that allow users to create online communities and engage in social networking are known as social media
A web page on which writers regularly record opinions, information, and links ​to other sites is known as a ​blog
Which of the following is not true of social networking sites like Facebook and Twitter? ​Less than 10 percent of U.S. adults get news from Facebook
Which of the following is not one of the roles that the text says media ​fills in U.S. and Texas politics? To be a forum solely for unbiased discussion of political topics
People are more likely to hear and remember ideas and information if they come from a trusted opinion leader
Which of the following has been a trend in news coverage? Competition for viewers and advertising dollars has led to more entertainment and less news in broadcasts
Followers of talk radio, cable news (such as FOX or MSNBC) or ideological blogs are likely to ​develop more political knowledge, but accept inaccurate or incomplete versions of reality
In the 19th century (1800s), newspapers in Texas and the other American states were​ highly partisan and not always truthful
The term “Yellow Journalism” referred to journalism based on sensationalism and exaggeration
The media play a role in keeping and protecting democracy by ​keeping citizens informed enough to make intelligent decisions and investigating government activities
Which of the following is not a reason that newspapers began to move away from strong partisanship toward more even-handed, objective reporting in the last half of the 19th century?​ The government passed laws requiring greater objectivity and less partisanship
For reporting to exhibit professionalism, it should be objective, neutral, and accurate
On the editorial pages of newspapers and magazines​ advocacy is practiced and editors and columnists give their opinions
The standards of professionalism are sometimes compromised when professional reporters over-report the views of​ government officials and others with power whom they see as reliable, legitimate and knowledgeable
When reporting is done in a combative style that features opposition, it is referred to adversarial journalism
Which of the following tend not to be heavily partisan in Texas? Newspapers
When the media help keep public officials honest by asking hard questions and looking into suspicious actions, they are engaging in ​investigative journalism
In the 1970s, the media in Texas supported Common Cause and other public interest groups ​in pushing through legislation to require open meetings and open records
Which of the following is true of the Texas media’s coverage of scandals in state politics? ​Media investigations have uncovered corruption and led to instances of public officials being held accountable
When it comes to agenda setting in Texas, the media ​struggle to exert influence because of fewer reporters, fragmented government, competition with interest groups, and more.
When it comes to shaping our perceptions of events and issues, the media provide information, but their ability to shape opinion is reduced by personal knowledge, connections, and pre-existing opinions
The strongest effect of attack ads on electoral politics seems to be that people who marginally support an attacked candidate become less certain and abstain from voting for that candidate
When the news media says how important an issue is or which part of a situation is most important, they are engaging in ​priming
When the news media provides meaning or defines the central theme of an issue, they are engaging in ​​framing
Which of the following conclusions is not supported by today’s research on media influence? The media have an influence on what citizens think about
Compared to political candidates at the national level, candidates in Texas​ have an easier time controlling or at least influencing how the media covers them
When critics of the media complain about “horserace journalism”, they are ​pointing to the fact that the media tend to focus more on who is winning an election than on the issues that matter
Candidates began to use social media for their campaigns in a major way in ​2008 and 2012
One of the key strategies that helped Barack Obama win both of his elections for President was​ identifying and micro-targeting potential younger voters through their e-mail and social media accounts
Which of the following is not true of Rick Perry’s highly successful 2010 gubernatorial campaign? ​He relied heavily on direct mail, phone banks, and volunteers knocking on the doors of strangers
Which of the following is not true of civic engagement and the Internet, according to study by the Pew Research Internet ​Project? Use of the Internet and social media lead to less civic engagement and political activity
When it comes to measures of civic engagement like voter turnout, being involved in groups, donating to charity, volunteering​ and discussing political issues online, Texans are below the national average
Which of the following is true of media outlets today?​ ​Reporters tend to be liberal and Democratic, while owners and publishers tend to be conservative and Republican
Texas newspapers have generally supported conservative political candidates
Talk radio has long been dominated by ​conservatives
Which amendment to the U.S. Constitution protects freedom of the press? First Amendment
American courts are very hesitant to allow prior restraint, which means ​it is difficult for the government to censor, or to suppress material before it is published
The agency responsible for media regulation is the Federal Communications Commission (FCC)
The idea that Internet service providers should treat all Internet data equally without charging differentially or ​blocking content they don’t like is referred to as net neutrality​
Which of the following is true regarding freedom of the press in Texas?​ ​Texas has a shield law that protects journalists from having to reveal certain confidential sources
Which of the following is not true of the media today? There are no sites on the Internet dedicated to checking facts
When a news medium focuses on a narrow audience defined by special interest, they are engaging in niche journalism
Which of the following is true of media ownership today?​ Just six corporations own most of the national media outlets
The trend in media ownership in Texas​ has been that ownership of Texas media outlets by Texas companies has declined
Which of the following is not a common concern about concentration of ​media ownership? There is an increase in hard news and a decrease in soft news
The reporters assigned to cover state-level news, commonly working in the state capital, are known as the ​capitol press corps
When the three major television networks began to face competition from cable news in the 1980s, they responded by reducing coverage of hard news and increasing coverage of scandals, horserace journalism, and controversial sound bites
Finance Flashcards

1013 Finance: Chapter 7

Money received or earned from a loan investment interest
_______ _____ is rent that is paid only for the amount of principal still owed simple interest
The formula for computing simple interest is I = _ _ _ PRT
The dollars required to pay off $1,000 of a loan for a set number of years on a fully amortized loan that will be paid off at the end of the loan payment is represented by the ___ __ ____ interest rate factor
A loan requiring someone to only pay interest until a stop date at which the entire principal is due is called a _____ (straight, bullet) term loan
__ ___ ____ are used to reduce monthly payments, and only require payments on interest interest-only loans
If a borrower was making payments on his loans that were not enough to cover the interest, the loan would be ____ _____ and adding the unpaid interest onto the principal negatively amortized
A point is ___ % of the _____ loan amount 1, total
Up-front interest paid to lower the interest rate for borrowers is called a ____ ____ discount point
money paid to lenders for a lower interest rate and monthly payment buydown
Interest paid in advance that permanently lowers a borrower’s payment is a ___ ____, if it is for a lesser period of time it is a ___ ___ permanent buyout, temporary buyout
_____ provides for payments on both principal and interest amortization
Payments that are paid on the 1st of a month and cover the principal due on that day, and the interest charged from the previous month, are paid in _____ arrears
What are the two general forms of real estate loans? conventional, governmental
Conventional loans can be _____ or _____ based on if they meet fannie/freddie guidelines conforming, non-conforming
Loans insured by FHA, VA, and the USDA will be ___ ____ governmental loans
A ____ ___ loan has a constant interest rate over the term of a loan. Buyer is usually allowed to pay off loan early fixed rate
____ ____ are part of a monthly payment on the loan, and are set aside to pay annual taxes and insurance escrow funds
taxing according to value ad valorem
The tax rate is expressed in terms of ____, which are ____ per thousand dollars of assessed value mills, thousandths
_____ insurance includes both hazard and liability insurance homeowners
An ___ ___ ____ has payments adjusted to a prearranged index, usually including an overall interest rate cap over the entire term of the loan adjustable rate mortgage
_____ ____ indicate the frequency interest rate adjustments in an ARM adjustment periods
For an ARM initial rates, or ____ rates are interest rates usually under market value to attract borrowers teaser
ARM: The calculated rate or ___ rate, ____ ___ ____, is imposed from time to time at the adjustment period note, index plus margin
The starting point to adjust a borrowers interest rate in an ARM index
ARM: profit a lender wants to make, that is a percentage rate added to the _____ to derive the new note rate is called the ____ index, margin
___ ___ ___ has loan payments that are lower at the beginning of the loan, and increase over time to fully amortize the loan. results in negative amortization during the beginning of the loan graduated payment mortgage
Type of loan with tax deductible interest home equity
Type of loan that allows borrower to write a check for an amount up to a limit based on the equity of the property home equity line of credit
Loan that pays buyers for the equity in homes, with title transferring to lender reverse annuity mortgage
Targeting individuals in disadvantaged communities for credit on unfair terms reverse redlining
The ____ _ ___ ___ ___ of 1994 protected homeowners from lenders performing reverse redlining homeownership and equity protection act
Loan limits are set by the ___ ___ ___ ____ and is currently _______ federal housing finance agency, $417,000
Loans exceeding the current fannie/freddie loan limit is considered a ___ ___ jumbo loan
PMI is required on ____ loans when the loan to value ratio is in excess of ____% as stated in fannie/freddie guidelines conventional, 80
Refinancing costs should generall be recovered over a __-__ yr period 2,3
The ___ ___ ____ allows lenders to modify an existing loan to provide borrowers with more affordable monthly payments at no more than 38% of gross monthly income. LTV must be at least 90% streamlined modification program
The ___ ___ ___ ___ (_ _ _ _) aimed to reduce homeowners monthly payments to a 31% front-end ratio Home affordable modification program (HAMP)
____ lenders provide or specialize in B,C, or D paper mortgage loans subprime
the practice of charging interest rates/fees that are higher than justified based on risk based financing predatory lending
An ___ ___ ____ allows borrowers to secure additional funds from a vendor, based on the principal already paid by borrower, and repaid by extending the term of lender, or increasing monthly payments. (often used by farmers) open end mortgage
Loan used to finance the costs of labor and materials as they are used during the course of construction of a building. Called a ___ ___, and also known as an ___ ____ construction loan, interim financing agreement
Construction mortgages pay out in ____ or stages as construction progresses draws
Used to protect a lender in a construction mortgage, a ____ ____, names the lender as the primary beneficiary of the loan completion bond
___ ___ are used when a lender requires a borrower to pledge more than one parcel of property as collateral blanket mortgage
In a blanket mortgage, if properties are located in more than one county, the deed must be _____ in ____ counties properties are in recorded, all
A ___ ___ is used in a blanket mortgage to relinquishing individual properties pledged as collateral as payments are made release clause
The ____ clause specifies that in the event of a default and a foreclosure, financiers will recognize and protect the rights of each individual lot owers recognition
A ____ mortgage include real estate as well as personal property (fixtures). package
_____ oversees the federal manufactured housing program HUD
When a seller carries back a portion or all of the sales price as a loan to a buyer, the buyer may have a ____ ___ _____, which can either be a ___ or ___ lien on the property purchase money mortgage, senior, junior
A ____ loan is an equity loan designed to serve a purpose, usually short term, and usually are an interest only loan with a balloon payment bridge
Created as a junior financing tol that encompasses an existing debt wraparound loan
Gives the buyer the absolute right to buy as long as the payments are kept current option to buy
A ___ ___ ___ _ ___ allows the buyer to lease the property for a period of time, then buy it at a predetermined price lease with option to buy
A lessee has the ___ __ ____ _____ when they are offered the first chance to purchase the property to the public right of first refusal
A contract that says the buyer will lease for a specified period of time and will buy at the specified price lease purchase
Mortgage participation has three types, ____ among several mortgagees, the ____ of several mortgagors, and a _____ between mortgagee and mortgagor partnership, teaming, partnership
A ____ of ______ involves more than one mortgagee as the owner of the financing instrument of a real estate project partnership mortgagees,
When several mortgagors share responsibility for a single mortgage on a multifamily property, called a cooperative, they form a ____ of _____ partnership mortgagors
When a mortgage becomes a partner in ownership of a project on which a loan will be placed they would have a ____ of _____ and ____. Which tend to have lower interest rates and will allow a higher LTV ratio partnershio mortgagees mortgagors
In a ___ ____ ____ a lender acts as both owner and financier, and will reduce the initial interest rate in exchange for a share of the properties future increased value shared appreciation mortgage
In a ___ ___ the owner sells a property to an investors, and then leases that property from him to acquire funds for financing projects, has tax deductible lease payments sale leaseback
Finance Flashcards

Finance CH 1

Which one of the following parties can sell shares of ABC stock in the primary market? ABC Company
Which one of the following is a capital structure decision? Establishing the preferred debt-equity level
Which one of the following applies to a general partnership? Any one of the partners can be held solely liable for all of the partnership’s debt.
Marti had an unexpected surprise when she ate her Lotsa Good cereal this morning. She found a piece of metal mixed in her cereal. The potential claim that Marti has against this firm is that of a(n): Stakeholder
In a general partnership, each partner is personally liable for: the total debts of the partnership, even if he or she was unaware of those debts.
The daily financial operations of a firm are primarily controlled by managing the: Working Capital
Which of the following are effective means of aligning management goals with shareholder interests?I. Employee stock optionsII. Threat of a takeoverIII. Management bonuses tied to performance goalsIV. Threat of a proxy fight I, II, III, and IV
The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990s? Corporate accounting and financial fraud
Capital budgeting includes the evaluation of which of the following? Size, timing, and risk of future cash flows
Which of the following are advantages of the corporate form of organization?I. Ability to raise large sums of equity capitalII. Ease of ownership transferIII. Profits taxed at the corporate levelIV. Limited liability for all owners I, II, and IV only
Which one of the following statements is correct? All stock trades between existing shareholders are secondary market transactions.
Beginning in 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires corporations with a market value over ________ to allow a nonbinding shareholder vote on executive pay. $75,000,000
Limited liability companies are primarily designed to: provide limited liability while avoiding double taxation.
Corporate shareholders: have the ability to change the corporation’s bylaws.
Which one of the following correctly defines a common chain of command within a corporation? The controller reports directly to the chief financial officer.
Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm’s: capital structure.
Which one of the following statements related to securities dealers is correct? Dealers buy and sell from their own inventory.
Which one of the following best matches the primary goal of financial management? Increasing the market value of the firm
Which one of the following is most apt to align management’s priorities with shareholders’ interests? Compensating managers with shares of stock that must be held for three years before the shares can be sold
Lester’s BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred to as the firm’s: Working Capital
Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability for the firm’s debts? General partnership
Which one of the following statements about a limited partnership is correct? There must be at least one general partner.
Which one of the following is a general characteristic of a securities broker? Trades listed securities in an auction market
Which one of the following statements is correct? NASDAQ has more listed stocks than does the NYSE.
Todd and Cathy created a firm that is a separate legal entity and will share ownership of that firm on a 50-50 basis. Which type of entity did they create if they have no personal liability for the firm’s debts? Corporation