Yo mama #1

Question 1

Which of the term structure theories claims that investors are limited to certain maturity ranges due to legal restrictions and personal preferences?

Answer 1

The Market segmentation theory: there are separate markets for long and sort term investments

Question 2

Which of the term structure theories claims that investors require maturity premiums to compensate them for buying securities that expose them to the risks of fluctuating interest rates?

Answer 2

Liquidity preference theory

Question 3

What do capital market instruments include?

Answer 3

Market for long term financial instruments:
Loans
Stocks,
Bonds

Question 4

What do Money markets include ?

Answer 4

Market for Short term debt instruments:
Treasury bills,
Negotiable CD’s,
commercial paper

Question 5

If you sell 100 shares of General Electric common stock, this transaction takes place in:

Answer 5

The Secondary Capital market

Question 6

Which of the following best describes the goal of the firm?

Answer 6

Maximizing the value of the firm’s equity.

Question 7

What is a General Partnership?

Answer 7

2 or more owners, each owner is fully responsible for liabilities

Question 8

What is a limited partnership ?

Answer 8

One or more partners has limited liability, up the amount of capital invested in the business

Question 9

What is an S corporation ?

Answer 9

Provides limited liability, but taxed like a partnership.

Question 10

Describe an LLC

Answer 10

Provides limited liability, taxed like a partnership, more flexible than an S corp.

Question 11

Describe a corporation

Answer 11

Business functions separate and apart from it’s owners. All owners have limited liability.

Question 12

cash,
marketable securities
Accounts receivable,
inventories,
and prepaid expenses are all

Answer 12

current assets

Question 13

what are examples of current liabilities

Answer 13

accounts payable
accrued expenses
short term notes

Question 14

How do you convert turnover ratio and inventory turnover into # of days ?

Answer 14

365/ turnover ratio or (turnover inventory)

Question 15

What is synonymous with operating profit ?

Answer 15

EBIT

Question 16

How do you calculate ROE on a firm financed with debt ?

Answer 16

Subtract debt interest from net income and divide by common equity.

Question 17

The goal of the firm is best described as:

Answer 17

a) maximizing the value of the firm’s common stock.

Question 18

Bypassing SEC registration to sell securities directly to a pension fund or insurance company is an example of a:

Answer 18

private placement

Question 19

The law that established the SEC is:

Answer 19

The securities exchange act of 1934

Question 20

Suppose your firm selects an investment banking firm to assist with your firm’s $50 million bond issue. The investment bank will buy the entire issue and sell each new bond to investors. This distribution method is referred to as:

Answer 20

negotiated purchase

Question 21

net profit margin formula is the same as

Answer 21

operating profit margin

Question 22

Which of the following is true regarding the over-the-counter market ?

Answer 22

The OTC brokers and dealers are linked by NASDAQ