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Principles of Finance > POV Module 2 > Flashcards

POV Module 2 Flashcards

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1
Q

finance

A

study of fund management and asset allocation over time

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2
Q

investment

A

placement of capital in expectation of deriving income/profit form it’s use

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3
Q

asset

A

something/someone of value

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4
Q

debtor

A

person/firm that owes money

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5
Q

agency cost

A

when agent behavior deviates from principle’s interest

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6
Q

valuation

A

process of estimating what something is worth

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7
Q

shareholders

A

owners

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8
Q

bondholders

A

creditors

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9
Q

stakeholders

A

others affected by company actions

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10
Q

financial markets

A

bring together lenders and borrowers

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11
Q

derivative

A

financial instrument whose value depends on the valuation of an underlying asset

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12
Q

capital

A

money and wealth

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13
Q

fungible

A

able to be substituted for something of equal value

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14
Q

exchange

A

a place for conducting trading

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15
Q

liquidity

A

available cash over short term

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16
Q

private placements

A

non-public offering; finding round of securities sold in a private offering to a small group of chosen investors

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17
Q

SEC

A

Securities and Exchange Commission

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18
Q

Securities and Exchange Commission

A

responsible for enforcing securities laws and regulations

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19
Q

Securities Act of 1933

A

Ensures investors receive complete and accurate information before investing; For retail investors; through registration provides financial and corp information about issuers of public securities

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20
Q

Rule 144, Securities Act of 1933

A

permits sale of restricted and controlled securities without registration

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21
Q

Regulation S

A

Safe Harbor; Securities Act of 1933; securities executed in another country, by non-US citizens, are not subject to registration requirements

22
Q

Section 4, Securities Act of 1933

A

exempts private placements from registration

23
Q

Securities Exchange Act of 1934

A

laws governing secondary trading of securities; regulates SEC; regulates broker-dealers without status for trading

24
Q

Maloney Act

A

Amendment to Securities Exchange Act of 1934; authorizes self regulatory organizations

25
Q

Alternative Trading System (ATS)

A

securities are bought/sold through smaller systems; niche market

26
Q

Sarbanes-Oxley Act (SOX) - aka

A

Public Company Accounting Reform and Investor Protection Act

27
Q

Sarbanes-Oxley Act (SOX) - broad

A

sets standards for US public company boards, management, and public accounting firms

28
Q

Insider Trading Act of 1988

A

Amendment to Securities Exchange Act of 1934; insider trading is bad

29
Q

Key driver of finance

A

Time value of money

30
Q

Finance vs. Economics vs. Accounting

A

Finance - future
Economics - cause and effect
Accounting - backward

31
Q

Money Market

A

Financial Market used for short term funding;
Used for general operating expenses;
facilitate transfer of liquidity

32
Q

Capital Market

A

Financial market used for long term funding;
used for investment in capital goods for growth;
facilitates raising of capital

33
Q

Primary Capital Markets

A

newly issued securities

34
Q

Secondary Capital Markets

A

continuous and regular market

35
Q

Examples of Capital Markets

A

stock markets, bond markets, derivatives markets, currency markets

36
Q

Key division of Capital Markets?

A

Primary vs secondary

37
Q

Stock Market

A

equity;

sell shares

38
Q

Bond Market

A

bonds;

tradable debt

39
Q

Derivatives Market

A

futures contracts or options derived from other assets

40
Q

Currency Market

A

enabled by foreign exchange

41
Q

SOX Title I - PCAOB

A

Public Company Accounting Oversight Board;

oversight of auditors

42
Q

SOX Title II - Auditor Independence

A

sets standards for auditor independence

43
Q

SOX Title III - Corporate Responsibility

A

Senior execs must take individual responsibility for accuracy and completeness of financial statements

44
Q

SOX Title IV - Enhanced Financial Disclosures

A

Enhanced reporting requirements (off-balance sheet, pro forma figures, stock transactions of corp officers);
Requires internal controls;
Mandates audits and reports on controls

45
Q

SOX Title V - Analyst COI

A

codes of conduct for securities analysts;

Requires disclosure of knowable conflicts

46
Q

SOX Title VI - Commission Resources and Authority

A

Defines SECs authority to censure or bar securities professionals from practice;
Defines conditions for being barred

47
Q

SOX Title VII - Studies and Reports

A

Requires Comptroller General and SEC to perform studies and report findings

48
Q

SOX Title VIII - Corp. and Criminal Fraud Accountability

A

Criminal penalties for manipulation, destruction, alteration of financial records or interference with investigations;
Protection for whistle blowers

49
Q

SOX Title IX - White Collar Crime Penalty Enhancement

A

Increased penalties for white collar crimes;

Criminal offense for failure to certify corp. financial reports

50
Q

SOX Title X - Corporate Tax Returns

A

CEO must sign corporate tax return

51
Q

SOX Title XI - Corporate Fraud Accountability

A

IDs corporate fraud and record tampering as criminal offenses;
Revises sentencing guidelines;
Strengthens penalties

52
Q

Penalties for Insider Trading

A

300% of the amount made on trade or $1 million;

up to 5 years in jail

Principles of Finance (4 decks)

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