Exam 1 Flashcards
(29 cards)
Approximately, what was the dollar value of the US household net worth as of 2020?
$124 Trillion
The majority of the dollar value of US household net wealth is derived from real assets (around 72%)
False
The role of financial system is to
match and save borrowers
The role of the financial system is to provide
key services (risk-sharing, liquidity, information)
The financial system is essential to
assure adequate capital formation and economic growth in a modern economy
The daily financial operations of a firm are primarily controlled by managing the
working capital
In the US, double taxation exists in the income of a
corporation
While financial assets generate net income to the economy, real assets simply define the allocation (distribution) of income among investors
False
In modern capitalism, the scale of enterprise has grown substantially and owners and managers are not the same people. The potential conflict of interest between a firms owners and its mangers is referred to as which type of conflict.
Principal-agent
Limited liability really took hold in ________ with a corporate law in the state of ________ and represented a significant invention
1811, New York
From a finance viewpoint the firm is a production function, not-a bundle of risky cash flows
False
Which one of the following best matches the primary goal of financial management
Maximizing owners market value of equity
Money markets consist of the institutions and procedures that provide for transactions in short-term financial instruments
True
Financial markets represent indirect financing
False
Almost all financial transactions involve information asymmetries
True
The measure of income that is unaffected by the financing aspects of the company’s operations as well as taxation is the
operating income (EBIT)
The income (profit/loss) statement is constructed according to the cash-basis accounting principle
False
The balance sheet is constructed according to the principle of accrual-basis accounting
False
The mission of the _______ is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. It was created in the year____.
SEC, 1934
Net working Capital
Current assets- current liabilities
According to Bloomberg, as of recently, the wealthiest person in the world is
Elon Musk with a net worth of approx $205 Billion
Cash and accounts payable are flow variables whereas sales and interest expense are stock variables
False
All else being equal, the higher the operating leverage the higher the business risk for a company
True
A trademark
is a long-term intangible asset
