Basic Finance Exam 1

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Can you name the Basic Finance Terms?

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DefinitionTermExtra
Minimum acceptable rate of return on capital investment
Market where securities are issued and tradedStock, Bond, commodity and foreign exhange markets
Rate at which money invested grows
Value currently in market--what it would sell for now
Investment plan set up by and employer to provide employees retirementDefined contribution fund(401k,403b) or defined benefit fund(employee doesnt contribute but portfolio manager manages)
Market for short term marketing
Direct ownership, unlimited liabilities, owners receive all profits, partners voted on by other partners, managing committee oversees, responsbile for debtMainly law and accounting firms
As credit rating goes down...More risky investment--less credible
Value of assets or liabilities according to BS
Interest rate in every calculation
Oversees treasurer, controller, and overall financial strategyCorporate Strucure
Determined when bond is issuedBondholder gets paid the int. rate(coupon rate) +face value amount at time of maturity
Market for debt securities
Corporate bonds quoted in ___
Sale of new securities by corporationsIPO/new shares
More important that banks for long term financing of business
Ability to sell or exchange an asset for cash on short noticeProvided by markets and intermediated---foreign exchange mkts are very liquid---real estate is not liquid
Private investment pool, open to wealthy or institutional investors, that is only lightly regulated and can pursue more speculative policies than MF
Junk Bonds(high yield)Higher the rating, lower the risk
Time it takes for the cash flows to recover the initial investment in the projectIf payback period is greater than a specific time, take the payback period that is shorter
Interest rate used to compute present value of future cash flows
Market in which previously issued securities are traded amongst investors
Market for longterm financing
DefinitionTermExtra
Investment company that pools the savings of many investors and invests in a portfolio of securities
Buying a stock for capital gain
US Treasuries quoted in ___ seconds
One owner runs the business, unlimited liability, responsible for debts but gets all profits, personally taxed(dividend tax return)Owner=manager
Stream of level cash flows that never end
Advise and assist companies in raising financing
How much do you want to spend and in what?One of two major financial decisions, tangible(machinery and plants) and intangible(patents, advertising)
Demarcation--investment grade bonus
Buying a stock for dividends
Rate at which the purchasing power of an investment increases
Responsible for budgeting, accounting and taxesCorporate structure
Organization that raises money from investors and provides financing for individuals, corps. or other orgs. Mutual Funds and Pension Funds--invest in financial assets(stocks+bonds+loans) to raise capital
Responsible for cash management, bank relationship and financing of companyCorporate structure
Present value of cash flows minus investment
Investors identify undervalued stocks by searching for patterns in past stock pricesOne way to beat the market
Publicly held debt, shareholders have indirect ownership and share in profits. limited liability to owners, overseen by board of directors, mananged by management committeeDouble taxation-corp tax and shareholders(receive dividends=dividends income tax return)
Present value of a future cash flow
Form and amount of what the firm will invest in corporate structureOne of two major financial decisions--issue stocks or bonds, cap. structure=debt+equity
Equally spaced series of cash flows over a period of timeFinite Maturity
Investors gauge company's prospects by studying press, trade press and other newsOne way to beat the market
Principal or par value
Bank, insurance company or similar financial intermediaryCan loan money in return for payments of interest

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