Financial Management

timer Asked: Apr 30th, 2013

Question Description

Help me study for my Business class. I’m stuck and don’t understand.

1.  Describe the cycle of money, the participants in the cycle, and the common objective
of borrowing and lending.

2.  Distinguish the four main areas of finance and briefly explain the financial activities that
each encompasses.

3.  Explain the different ways of classifying financial markets.

4.  Discuss the three main categories of financial management.

5.  Identify the main objective of the finance manager and how that objective might be

6.  Explain how the finance manager interacts with both internal and external players.

7.  Delineate the three main types of business organizations and their respective advantages
and disadvantages.

8.  Illustrate agency theory and the principal-agent problem.

9.  Review issues in corporate governance and business ethics.

1.  Explain the foundations of the balance sheet and income statement

2.  Use the cash flow identity to explain cash flow.

3.  Provide some context for financial reporting.

4.  Recognize and view Internet sites that provide financial information.

1.  Debits always equal credits. What type of accounting system uses this requirement? What is the accounting identity? What is the connection between “debits always equal credits” and the accounting identity?

2.  From the income statement accounts below,

a.  produce the income statement for the year.

b.   produce the operating cash flow for the year.

Income Statement Accounts for the Year Ending 2007

Cost of Goods Sold


Interest Expense

$  218,000


$  318,000



SG&A Expenses

$  450,000


$  250,000

3.  Since 1950, the interest rates for long-term government bonds have averaged a higher interest rate than short-term government bonds. Why?


4.  During what decade from 1950 to 1999 did we see the highest interest rates in the United States?


5.  What is a bond? What determines the price of this financial asset?


  6. What is the primary difference between an annual bond and a semiannual bond? What changes do you need to make in finding the price of a semiannual bond versus an annual bond?


  7. When we talk about the yield of a bond, we usually mean the yield to maturity of the bond. Why?


8.  What are three key features of common stock?


  9.  What are the differences between authorized, issued, and outstanding shares?


  10.  What is the role of the investment banker in the primary sale of common stock?


  11.  What are the potential repercussions if the investment banker does not perform the due diligence task?


  12.  What is the function of a specialist in the secondary market?


  13.  What is a bid price and what is an ask price?


  14.  What is the difference between preferred stock and common stock?



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