Unit 2

Question 1

The study of managing and allocating funds at the personal or business level

Answer 1

Finance

Question 2

o Forward looking or primarily focused on the future.
o Management and allocation of capital with the objective of investing forecasting budgeting, saving, borrowing, lending and so on.
o Uses accounting information to achieve these objectives.

Answer 2

Finance

Question 3

The system of recording, reporting, and summarizing past financial information and transactions.
o Backward looking and focuses on the past.

Answer 3

Accounting

Question 4

A financial asset that can be used by a firm or individual.
Ex. machinery or cash held by a firm.

Answer 4

Capital

Question 5

An area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to its owners, and the tools and analysis used to allocate financial recourses.

Answer 5

Business finance

Question 6

The mixture of debt and equity used to finance a firm.

Answer 6

Capital structure

Question 7

An area of finance that involves deciding which assets to invest in to create wealth in the future.

Answer 7

Investments

Question 8

The process of valuing assets.

Answer 8

Asset Pricing

Question 9

What someone would pay right now for an asset.

Answer 9

Current Market Value

Question 10

An area of finance that involves activities used to increase shareholder wealth.

Answer 10

Corporate finance

Question 11

An area of finance that includes firms or organizations that exist to accept a wide variety of deposits, to offer investment products to individuals and businesses, to provide loans, or to broker financial transactions.

Answer 11

Financial Institutions

Question 12

The total satisfaction received from consuming goods and services; the happiness you gain from your decisions as a consumer

Answer 12

Utility

Question 13

Shares of ownership; stocks

Answer 13

Equity

Question 14

Firms that have issued shares to the public

Answer 14

Publicly Traded Firms

Question 15

Firms that have not issued shares to the public where the ownership rights are privately held.

Answer 15

Private held companies

Question 16

Managing the day-to-day finance operations of a firm.

Answer 16

Cash Management

Question 17

Methods used to minimize the amount of taxes a business pays

Answer 17

Tax Strategies

Question 18

Incorporating new finance ideas within a firm.

Answer 18

Financial Policy Implementation

Question 19

A financial institution that invests in an entity that is not publicly listed or traded using money received from institutional investors and wealthy individuals; Firms that are privately held and whose ownership is not yet bought or sold on any public stock exchange.

Answer 19

Private Equity

Question 20

Professional managers of investment capital that typically invest in very young new ventures.

Answer 20

Venture Capitalists (VCs)

Question 21

generating cash or stock from the sales or IPO of companies in the portfolio of investments.

Answer 21

Harvest

Question 22

financial institution that accepts deposits, offers checking and savings accounts, and other basic financial products; extends various loans.

Answer 22

Commercial Banking

Question 23

An entry-level commercial bank position with the responsibility to interact with customers at the bank’s front desk or drive-through window.

Answer 23

Teller

Question 24

A commercial bank position with the responsibility to assess the riskiness of lending to borrowers and determining whether or not loans should be extended to potential bank clients.

Answer 24

Credit Analysts

Question 25

A commercial bank position with the responsibility to find and attract new clients

Answer 25

Personal Bankers

Question 26

An arrangement that allows a third party to hold assets on behalf of a beneficiary or beneficiaries

Answer 26

Trusts

Question 27

Everything that a person owns or controls, especially at death.

Answer 27

Estates

Question 28

A legal expression of an individual's wishes concerning the deposition of his or her property after death.

Answer 28

Wills

Question 29

The ability to turn financial securities into cash easily without losing significant value

Answer 29

Liquidity

Question 30

A debt instrument (bond) that is issued by the United States government in order to raise capital

Answer 30

Treasury Securities

Question 31

The top line of the income statement. The total amount of money a business brings in (before subtracting any costs)

Answer 31

Revenues

Question 32

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

Answer 32

Corporate Bonds

Question 33

A share of ownership in a company

Answer 33

Stock

Question 34

A type of financial market used for short-term assets that are held for less than one year

Answer 34

Money Market

Question 35

A type of financial market used for long-term assets that are held for greater than one year.

Answer 35

Capital Markets

Question 36

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

Answer 36

Primary Market

Question 37

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

Answer 37

Syndicate

Question 38

When a privately held company first offers shares of stock to outside investors to raise capital, therefore becoming a publicly owned company; aka equity offerings

Answer 38

Initial Public Offering (IPO)

Question 39

Where securities are traded after initial issuance.

Answer 39

Secondary Financial Market

Question 40

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

Answer 40

Auction Market

Question 41

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

Answer 41

Dealer Market

Question 42

A market maker on the NYSE that holds an inventory of securities and acts as liquidity provider to those that wish to buy and sell

Answer 42

Specialist

Question 43

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

Answer 43

Risk

Question 44

The difference between the bid and ask prices that compensate the specialist for the risk that he or she bears for willingness to provide liquidity.

Answer 44

Bid-ask Spread

Question 45

An independent federal government agency that (1) protects investors, (2) maintains fair, orderly, and efficient markets, and (3) facilitates capital formation.

Answer 45

U.S. Securities and Exchange Commission (SEC)

Question 46

Financial institution that accepts monetary deposits and provides loans. Includes savings banks, commercial banks, savings and loan associations, and credit unions.

Answer 46

Depository institution

Question 47

A type of depository institution also known as a “thrift” institution that places a significant focus on providing loans for residential mortgages and real estate.

Answer 47

Savings and loans association

Question 48

Financial institution that is not allowed to accept monetary deposits but may perform functions such as lending money or acting as an intermediary between savers and lenders. Examples include brokerage firms, investment firms, mutual funds, and hedge funds.

Answer 48

Non-depository institution

Question 49

Financial institution that facilitates the investment and purchase of securities in financial markets. Common services include underwriting, trading of securities on secondary markets, and the general sale of securities.

Answer 49

Securities firm

Question 50

Company that invests the capital of investors in financial securities. Examples include mutual funds and investment trusts. The company may also be involved in issuing securities.

Answer 50

Investment firm

Question 51

Financial intermediary that raises capital for long-term contractual agreements. Examples include an insurance company or a private pension fund.

Answer 51

Contractual savings institution

Question 52

A financial institution that specializes in managing and administering retirement funds,

Answer 52

Pension Fund

Question 53

Ensure that a nation's economy remains healthy by controlling the amount of money circulating in the economy.

Answer 53

Central Banks

Question 54

An investment company that continually offers investments and buys financial securities and instruments on behalf of investors.

Answer 54

Mutual Fund

Question 55

A financial intermediary that offers complex financial transactions such as underwriting, facilitating mergers, and buying and selling financial securities on behalf of large institutions.

Answer 55

Investment Bank

Question 56

Charge Premiums to invest in bonds and stocks to pay claims

Answer 56

Insurance Companies

Question 57

Receive deposits and extend loans to individuals and businesses.

Answer 57

Banks and Credit Unions

Question 58

Indicators that usually change before the economy changes.

Answer 58

Leading indicators

Question 59

Indicators that change after the economy changes.

Answer 59

Lagging indicators

Question 60

Indicators that are collected used and analyzed as economic shifts happen.

Answer 60

Coincident Indicators

Question 61

Following accepted standards of moral conduct.

Answer 61

Ethics

Question 62

Following one's standards of right and wrong behavior

Answer 62

Morals

Question 63

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

Answer 63

Agency Costs

Question 64

When the agent (the management) does not act in the best interest of the principal (the owners).

Answer 64

Agency Problem

Question 65

The business function responsible for generating sales.

Answer 65

Marketing

Question 66

The top line of the income statement. The total amount of money a business brings in (before substracting out any costs).

Answer 66

Sales

Question 67

A physical trading floor and a computer network where stocks are bought and sold. It is the largest stock exchange in the world

Answer 67

New York Stock Exchange (NYSE)

Question 68

A market in which prices fully reflect all the available information about a specific security.

Answer 68

Efficient Market

Question 69

A hypothesized estimate of future prices or returns under different scenarios based on expectational data.

Answer 69

Expected Return

Question 70

A person who makes strategic financial decisions in a corporation

Answer 70

Financial Managers

Question 71

Following the laws and rules set by an authority

Answer 71

Legal

Question 72

A computer network where stocks are bought and sold. It is the second-largest stock exchange in the world. Typically, technology- related companies will go public through this exchange.

Answer 72

NASDAQ

Question 73

The business function responsible for improving and developing services and products

Answer 73

Research and Development

Question 74

The process of combining several types of contractual debt (such as mortgages) and reselling them as a package to investors

Answer 74

Securitization

Question 75

A person who owns shares of a company's stock

Answer 75

Shareholders

Question 76

Anyone who maybe affected by actions taken or a decision made

Answer 76

Stakeholder