Ba 318 Finance

Front 1

What is the most appropriate goal for corporate management?

Back 1

Maximizing the market value of the company's stock

Front 2

Deciding what long term assets a company should invest in is referred to as

Back 2

Capital Budgeting Decisions

Front 3

What are capital structure decisions?

Back 3

short-term debt, accounts payable, and other liabilities.

Front 4

The following are true of bonds:

Back 4

1. Bonds are required to pay coupon payments or else they are in default

2. Bonds represent debt for the companies selling them to investors.

3. The US gov't through the treasure department sells bonds to investors.

Front 5

What is false of bonds?

Back 5

Bond Investors get to vote for the board of directors.

Front 6

What is true of interest rates?

Back 6

When interest rates rise, long term bonds will decline in value more than short term bonds

Front 7

What is the priority in bankruptcy?

Back 7

Bonds, preferred stock, common stock.

Front 8

The following are false:

Back 8

1. interest rates rise, bond prices rise
2. interest rates rise, bond values do not change
3. interest rates rise coupon payments decrease
4. stocks selling between investors occur on the primary market
5. if you expect interest rates to fall you want to buy short term bonds
6. The default risk premium compensates investors for interest rate risk.

Front 9

Agency Problems:

Back 9

May interfere with the goal of maximizing shareholder wealth

Front 10

given rate of return of zero, the future value of a lump sum invested today will always:

Back 10

remain constant regardless of the time period.

Front 11

The present value of an annuity considers which of the following factors?

Back 11

All: The timing of each cash flow
The amount of each cf
the discount rate
the number of cash flows

Front 12

The yield to maturity on a bond

Back 12

Can be used as the require rate of return to value the bond

Front 13

Suppose interest rates have been at historically high levels the past 2 years, a reasonable strategy for bond investors during this time period would be to

Back 13

Invest in long term bonds to lock in a bond position for when interest rates decrease in the future.

Front 14

All of the following affect the value of a bond:

Back 14

1. investor's required rate of return
2. the coupon rate of interest
3. The maturity date of the bond.

Front 15

What does not affect the value of a bond?

Back 15

The recored value of the firm's asset

Front 16

If the market price of a bond increases then

Back 16

The yield to maturity decreases.

Front 17

If interest rates go down

Back 17

the value of the bonds will increase

There is an inverse relationship with interest rates and the price or value of the bond.

Front 18

When is a bond selling at premium?
Par?
Discount?

Back 18

1. Premium: Coup Rate is > the required rate

2. Discount: Coup Rate is < the required rate

3. Par: =

Front 19

Bond Rating Codes:

Back 19

A and up = investment grade

BB or Ba and down = Junk Bonds

Front 20

If market interest rates rise:

Back 20

Long term bonds will decline value more than short term bonds

Front 21

Corporate form of business:

Back 21

Has the disadvantage of double taxation relative to a sole proprietorship.

A business entity which is treated as a legal person , legal entity seperate from its owners

Front 22

Goal of the firm

Back 22

Maximize shareholder wealth

Front 23

Capital Structure: (Financing)

Back 23

Decides what assets to purchase
where do we get the $ how to pay for projects

Front 24

Working Capital:

Working capital management:

Back 24

Short term assets and short term liabilities

the management of a firm's cash, inventory, and payables

Front 25

Anyone other than the firm's stockholders or creditors that might have a claim on cash flows

Back 25

stakeholder

Front 26

Capital budgeting: ( Investing)

Back 26

planning and managing LONG TERM investments, what projects?