Gateway to Business Final Exam Chapter 16

The primary goal of financial management is to:

Maximize owners’ wealth

A financial manager deciding whether to issue new stock or borrow is making a:

Financing decision

Allocating funds to purchase equipment or expand facilities is an example of:

Capital budgeting

Which of the following provides funds without repayment obligation?

Equity financing

Which is an advantage of equity financing?

No repayment obligation

Which is NOT a source of short-term financing?

Retained earnings

Long-term financing typically includes:

Bonds

Retained earnings are

Profits reinvested into the company

Which is a disadvantage of issuing stock?

Dilution of ownership

Which financing requires regular interest payments?

Bonds

The market where new securities are sold is the:

Primary market

The market where investors trade previously issued securities is the:

Secondary market

Selling stock for the first time to the public is called:

Initial Public Offering (IPO)

Which stock carries voting rights?

Common stock

Which security typically pays fixed dividends?

Preferred stock

Bondholders are considered:

Creditors

The face value of a bond is called:

Par value

The interest rate on a bond is the:

Coupon rate

When a bond reaches its maturity date:

Par value is repaid

The organization that regulates securities markets in the U.S. is:

SEC

Which institution accepts deposits and makes loans?

Commercial bank

Insurance companies invest funds primarily from:

Premiums

Pension funds invest to provide:

Retirement income

Which pools money from investors to buy diversified portfolios?

Mutual funds

A company seeking advice on mergers would approach a(n):

Investment bank

Which is a potential risk of international finance?

Currency exchange fluctuations

A bond issued by the U.S. government is called a:

Treasury bond

Equity financing is represented by:

Stocks

Debt financing is represented by:

Bonds

The overall purpose of financial markets is to:

Facilitate the transfer of funds between savers and borrowers