Chapter 1

Question 1

What are the questions financial managers seek to answer?

Answer 1

1) what kind of long term financial project to take on
2) how to finance the project (debt v equity)
3) how to better manage daily cash decisions

Question 2

Capital Budgeting

Answer 2

Planning/managing long term investments. Is it worth it?

Relates to question 1

Question 3

Capital Structure

Answer 3

The mixture of debt and equity. How much should be borrowed? How/where to raise the $?

Relates to question 2

Question 4

Working Capital Management

Answer 4

Short term assets and liabilities. How much inventory to keep? Sell on credit? Terms?

Question 5

Primary Market

Answer 5

Corporation is the seller. $ is raised for the corporation.

Question 6

NYSE

Answer 6

The largest auction market. More stringent requirements than NASDAQ

Question 7

Secondary Market

Answer 7

One owner/creditor selling to another

Question 8

Ultimate goal of financial management

Answer 8

Increase the current value per share

Question 9

Capital budgeting considerations (4)

Answer 9

1) project startup costs
2) timing of all projected cash flows
3) dependability of future cash flows
4) dollar amount of each projected cash flow