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C 214: Financial Management > Overview of Finance > Flashcards

Overview of Finance Flashcards

1
Q

The study of management or the allocation of capital

A

Finance

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2
Q

A financial asset or the value of an asset

A

Capital

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3
Q

Most liquid current asset on the balance sheet

A

Cash

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4
Q

To exchange something in hope of a return

A

Invest

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5
Q

Proof of equity ownership of a firm. Gives the holder of the stock the right to vote on matters of the company and to claim to the assets of the company after debt and preferred stock holders have been paid

A

Stocks

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6
Q

A fixed income financing instrument

A

Bond

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7
Q

Three important areas in finance

A

Corporate Finance
Investments
Banking or Financial Institution

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8
Q

Focuses on financial decision making by a firm’s management

A

Corporate Finance

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9
Q

This area is devoted to understanding the various types of financial instruments, such as stocks, bonds, etc., and how to value thee instruments

A

Investments

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10
Q

Intermediaries, such as banks, that link those that save to those that need to borrow

A

Financial Institution

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11
Q

To pay for something

A

Finance

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12
Q

Money lent by a creditor to provide financing for the borrower

A

Debt (bonds)

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13
Q

Ownership in an asset such as a company

A

Equity (stocks)

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14
Q

A debt instrument that is issued by the United States Government in order to raise capital

A

Treasury Securities

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15
Q

The top line of the income statement

A

Revenues

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16
Q

The total amount of money a business brings in before subtracting out any costs

A

Revenues

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17
Q

When tax revenues fall short of covering their projects, what happens?

A

The U.S. Treasury will issue bonds

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18
Q

A debt instrument that is issued by a corporation in order to raise capital

A

Corporate Bonds

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19
Q

An equity instrument that is issued by a firm and represents a share of ownership in a particular company

A

Stocks

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20
Q

The financial market where securities (stocks/bonds) are first sold

A

Primary Market

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21
Q

A group of intermediaries that is used to oversee the issuance of stocks and/or bonds

A

Syndicate

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22
Q

Who has the responsibility of determining the value of the security?

A

The Underwriter

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23
Q

What are the two ways a firm can place bonds with a syndicate?

A

Competitive sale or a Negotiated Sale

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24
Q

When a public goes out to raise money from the public for the first time by offering a share of its company

A

Initial Public Offering (IPO)

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25
Q

The financial market where securities are traded after the initial issuance

A

Secondary Market

26
Q

Where are assets priced?

A

Markets

27
Q

A market with a physical location and where prices are determined by investors’ willingness to pay

A

Auction Market

28
Q

The world’s largest secondary financial market

A

New York Stock Exchange

29
Q

The New York Stock Exchange is an example of

A

An Auction Market

30
Q

A physical trading floor and a computer network where stocks are bought and sold

A

New York Stock Exchange

31
Q

A market made up from multiple dealers that hold an inventory of securities and quote prices

A

Dealer Market

32
Q

A dealer market does not require

A

A physical location

33
Q

The second largest secondary market in the world is

A

NASDAQ

34
Q

Typically, technology related companies will go public through this exchange

A

NASDAQ

35
Q

NASDAQ is an example of

A

A Dealer Market

36
Q

The ability to convert an asset to cash quickly without losing significant value

A

Liquidity

37
Q

A market maker on the New York Stock Exchange that holds an inventory of securities and acts as a liquidity provider to those that wish to buy and sell

A

Specialist

38
Q

A specialist provides

A

Liquidity

39
Q

The possibility that the realized or actual return will differ from our expected return

A

Risk

40
Q

Orders used by investors that time sensitive and are executed on a first come-first serve basis

A

Market Orders

41
Q

Orders used by investors that are executed only if market prices reach the limit price

A

Limit Orders

42
Q

Market orders are ________ sensitive

A

Time

43
Q

Limit orders are _________ sensitive

A

Price

44
Q

What are the three roles of prices?

A

Convey information to consumers
Prices Affect Incentives
Prices affect the distribution of income

45
Q

Another word for net income

A

Earnings

46
Q

When a company announces unexpectedly strong earnings, an efficient market will

A

build up the stock price

47
Q

How much an investor gets out of an investment divided by how much the investor put into the investment

A

Return

48
Q

What are the 2 types of returns?

A

Dollar Returns
Percentage Returns

49
Q

The increase or decrease in price that is observed by an investor that buys and holds a particular security

A

Dollar Returns

50
Q

The percentage increase or decrease in price that is observed by an investor that buys and holds a particular security

A

Percentage Returns

51
Q

The degree to which prices in a market reflect all available information

A

Market Efficiency

52
Q

The goal of the firm is to

A

Maximize shareholder value

53
Q

Maximized shareholder value is usually accomplished by

A

Profitable decision-making by management
Investing capital into projects that will increase the firm’s stock price
Avoiding those investments that cost more money than they bring in

54
Q

The business function responsible for the production of the good or service being sold

A

Operations

55
Q

Costs that are incurred when management does not act in the best interests of shareholders

A

Agency Costs

56
Q

The costs that result from the principle-agent problem

A

Agency Costs

57
Q

Most shareholders/owners have delegated the responsibility of running the day to day operations of the firm to

A

Management

58
Q

The business function responsible of generating sales

A

Marketing

59
Q

A company’s marketing team may come up with an advertising campaign that might improve

A

Sales

60
Q

The top line of the income statement

A

Sales

61
Q

The total amount of money a business brings in before subtracting out any costs

A

Sales

62
Q
A

C 214: Financial Management (9 decks)

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