QUESTION Why do you think it is important that we have a Federal Reserve Board? What will be an ideal response? ANSWER Answer: The Federal Reserve Board of Governors works with the president’s administration to formulate economic policy. Chief among their responsibilities is to set monetary policy, using interest rates and other tools to […]
QUESTION What is the name given to the financial contract whose value comes from a wide range of sources, including stocks, loans, and market indexes, and whose investors pay a set price in return for possible profits later? A) derivative B) pension fund C) certificate of deposit D) Super-NOW E) time deposit ANSWER Answer: […]
QUESTION What do you think might be a potential drawback to a company extending credit to its customers? What will be an ideal response? ANSWER Answer: One drawback to a company extending credit to its customers is it may find it has a significant percentage of its assets tied up in credit, which means […]
QUESTION What are the four reasons why companies need to obtain financing? What will be an ideal response? ANSWER Answer: Companies need to obtain financing to manage everyday business activities, extend credit to their customers, keep enough product available, and make major investments. Explanation: Companies, large and small, need funds for managing everyday business […]
QUESTION How are both cash and capital budgets different from operating budgets? What will be an ideal response? ANSWER Answer: Capital and cash budgets are financial budgets, meaning they concentrate on the company’s financial goals and the resources needed to achieve them. Operating budgets are not financial budgets—they instead identify a firm’s sales and […]
QUESTION Why do you think the role of financial manager is so important in a business? What will be an ideal response? ANSWER Answer: Financial managers are responsible for planning and controlling the acquisition and uses of a firm’s funds. Central to the job of financial management is risk-return trade-off, in which financial managers […]
QUESTION Why do you think credit is so important to so many people? What will be an ideal response? ANSWER Answer: Credit is important because most ordinary people can’t buy big-ticket items (cars, houses, etc.) without credit. Companies, too, have big-ticket items for which credit is often needed, such as land, buildings, equipment, etc. […]
QUESTION What are the nondeposit companies called that make short-term loans at higher interest rates to individuals or businesses that don’t meet the credit requirements of regular banks? A) insurance companies B) pension funds C) finance companies D) brokerage firms E) money market firms ANSWER Answer: C Explanation: C) Finance companies are nondeposit companies […]
QUESTION As your firm’s controller, you review an invoice that says “2/10, Net 30.” What does that mean? What will be an ideal response? ANSWER Answer: When an invoice says “2/10, Net 30,” that means that the buyer can take a 2% discount for paying the bill within 10 days, but in any case […]
QUESTION What are the nondeposit institutions that provide retirement benefits to workers and their families called? A) insurance companies B) pension funds C) finance companies D) brokerage firms E) money market firms ANSWER Answer: B Explanation: B) Pension funds are nondeposit institutions that provide retirement benefits to workers and their families.
