Finance: Unit 2

Question 1

What are the three main areas of Finance?

Answer 1

• Financial Institutions
• Financial Markets
• Financial Management

Question 2

What are the two main drivers of finance?

Answer 2

• Time Value of Money

- Risk

Question 3

Define investment

Answer 3

A placement of capital in expectation of deriving income or profit from its use.

Question 4

Define asset

Answer 4

Something or someone of any value; any portion of one’s property or effects considered.

Question 5

Define debtor

Answer 5

A person of firm that owes money, one in debt, or one who owes a debt.

Question 6

What is the basic idea of the Time Value of Money?

Answer 6

That money today is worth more than the same amount in the future.

Question 7

Does Accounting look forward or backward?

Answer 7

Backward

Question 8

What is Return?

Answer 8

The gain or loss from an investment.

Question 9

What is Finance?

Answer 9

The study of how to optimally allocate assets.

Fundamentally a forward looking field concerned with what an asset will be worth in the future.

Question 10

What is Economics?

Answer 10

A social science that analyzes the production, distribution, and consumption of goods and services.

Question 11

What is Accounting?

Answer 11

The communication of a business’s financial information.