Exam 1: The Financial Environment

Involves estimating cash flows and evaluating asset investment opportunities.

Individuals and businesses hold money for purchases or payments they expect to make in the near future.

The ______________ is a term used to describe the financial system, institutions, markets, businesses, individuals, and global interactions that help the economy operate efficiently

All investment risk is not the same.

Functions of the monetary system include which of the following:

Money markets are the markets where generally short-term assets are traded.

__________ are where the initial offering or origination of debt and equity securities takes place.

This is the intermediaries that help the financial system operate efficiently and transfer funds from savers to individuals, businesses, and governments that seek to spend or invest the funds,

The principle of finance that "reputation matters" implies that for institutions or businesses to be successful, they must have the trust and confidence of their customers, employees, and owners, as well as the community and society within which they operate.

The principle of finance that "reputation matters" sometimes is harmed by the different objectives of owners and managers.

Financial environment is the country or countries being studied.

Money markets are where debt securities with maturities of one year or more are issued and traded.

Creating and transferring money is the role of who?

The principle of finance that "management objectives may differ from owner objectives" can be resolved by increasing manager salaries.

Which of the following is not a part of the financial environment?

Involves analyzing the investment potential of real property and securities for pension fund holdings.

Economists use a ___________________ framework to explain how the prices and quantities of goods and services are determined in a free-market economic system.

________________ facilitate the transfer of financial assets among individuals, institutions, businesses, and governments.

Involves evaluating consumer and/or commercial loan applications.

The role of the monetary system is to print and circulate currency.