POV Module 2

Question 1

finance

Answer 1

study of fund management and asset allocation over time

Question 2

investment

Answer 2

placement of capital in expectation of deriving income/profit form it’s use

Question 3

asset

Answer 3

something/someone of value

Question 4

debtor

Answer 4

person/firm that owes money

Question 5

agency cost

Answer 5

when agent behavior deviates from principle’s interest

Question 6

valuation

Answer 6

process of estimating what something is worth

Question 7

shareholders

Answer 7

owners

Question 8

bondholders

Answer 8

creditors

Question 9

stakeholders

Answer 9

others affected by company actions

Question 10

financial markets

Answer 10

bring together lenders and borrowers

Question 11

derivative

Answer 11

financial instrument whose value depends on the valuation of an underlying asset

Question 12

capital

Answer 12

money and wealth

Question 13

fungible

Answer 13

able to be substituted for something of equal value

Question 14

exchange

Answer 14

a place for conducting trading

Question 15

liquidity

Answer 15

available cash over short term

Question 16

private placements

Answer 16

non-public offering; finding round of securities sold in a private offering to a small group of chosen investors

Question 17

SEC

Answer 17

Securities and Exchange Commission

Question 18

Securities and Exchange Commission

Answer 18

responsible for enforcing securities laws and regulations

Question 19

Securities Act of 1933

Answer 19

Ensures investors receive complete and accurate information before investing; For retail investors; through registration provides financial and corp information about issuers of public securities

Question 20

Rule 144, Securities Act of 1933

Answer 20

permits sale of restricted and controlled securities without registration

Question 21

Regulation S

Answer 21

Safe Harbor; Securities Act of 1933; securities executed in another country, by non-US citizens, are not subject to registration requirements

Question 22

Section 4, Securities Act of 1933

Answer 22

exempts private placements from registration

Question 23

Securities Exchange Act of 1934

Answer 23

laws governing secondary trading of securities; regulates SEC; regulates broker-dealers without status for trading

Question 24

Maloney Act

Answer 24

Amendment to Securities Exchange Act of 1934; authorizes self regulatory organizations

Question 25

Alternative Trading System (ATS)

Answer 25

securities are bought/sold through smaller systems; niche market

Question 26

Sarbanes-Oxley Act (SOX) - aka

Answer 26

Public Company Accounting Reform and Investor Protection Act

Question 27

Sarbanes-Oxley Act (SOX) - broad

Answer 27

sets standards for US public company boards, management, and public accounting firms

Question 28

Insider Trading Act of 1988

Answer 28

Amendment to Securities Exchange Act of 1934; insider trading is bad

Question 29

Key driver of finance

Answer 29

Time value of money

Question 30

Finance vs. Economics vs. Accounting

Answer 30

Finance - future Economics - cause and effect Accounting - backward

Question 31

Money Market

Answer 31

Financial Market used for short term funding; Used for general operating expenses; facilitate transfer of liquidity

Question 32

Capital Market

Answer 32

Financial market used for long term funding; used for investment in capital goods for growth; facilitates raising of capital

Question 33

Primary Capital Markets

Answer 33

newly issued securities

Question 34

Secondary Capital Markets

Answer 34

continuous and regular market

Question 35

Examples of Capital Markets

Answer 35

stock markets, bond markets, derivatives markets, currency markets

Question 36

Key division of Capital Markets?

Answer 36

Primary vs secondary

Question 37

Stock Market

Answer 37

equity; | sell shares

Question 38

Bond Market

Answer 38

bonds; | tradable debt

Question 39

Derivatives Market

Answer 39

futures contracts or options derived from other assets

Question 40

Currency Market

Answer 40

enabled by foreign exchange

Question 41

SOX Title I - PCAOB

Answer 41

Public Company Accounting Oversight Board; | oversight of auditors

Question 42

SOX Title II - Auditor Independence

Answer 42

sets standards for auditor independence

Question 43

SOX Title III - Corporate Responsibility

Answer 43

Senior execs must take individual responsibility for accuracy and completeness of financial statements

Question 44

SOX Title IV - Enhanced Financial Disclosures

Answer 44

Enhanced reporting requirements (off-balance sheet, pro forma figures, stock transactions of corp officers); Requires internal controls; Mandates audits and reports on controls

Question 45

SOX Title V - Analyst COI

Answer 45

codes of conduct for securities analysts; | Requires disclosure of knowable conflicts

Question 46

SOX Title VI - Commission Resources and Authority

Answer 46

Defines SECs authority to censure or bar securities professionals from practice; Defines conditions for being barred

Question 47

SOX Title VII - Studies and Reports

Answer 47

Requires Comptroller General and SEC to perform studies and report findings

Question 48

SOX Title VIII - Corp. and Criminal Fraud Accountability

Answer 48

Criminal penalties for manipulation, destruction, alteration of financial records or interference with investigations; Protection for whistle blowers

Question 49

SOX Title IX - White Collar Crime Penalty Enhancement

Answer 49

Increased penalties for white collar crimes; | Criminal offense for failure to certify corp. financial reports

Question 50

SOX Title X - Corporate Tax Returns

Answer 50

CEO must sign corporate tax return

Question 51

SOX Title XI - Corporate Fraud Accountability

Answer 51

IDs corporate fraud and record tampering as criminal offenses; Revises sentencing guidelines; Strengthens penalties

Question 52

Penalties for Insider Trading

Answer 52

300% of the amount made on trade or $1 million; | up to 5 years in jail