Description
The purpose of this assignment is to explain core concepts related to the U.S. financial system.Read the Chapter 1 Mini Case in Financial Management: Theory and Practice. Complete Parts 1 and 2.Using complete sentences and academic vocabulary, please answer questions a through d.While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines.This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
Unformatted Attachment Preview
Collapse All
Mini Case 1 – Rubric
Question A
5 points
Criteria Description
Question A
5. Target
5 points
Answer is thorough.
4. Acceptable
4.35 points
Answer is detailed.
3. Approaching
3.95 points
Answer is present.
2. Insufficient
3.7 points
Answer is present but lacks detail or is incomplete.
1. Unsatisfactory
0 points
Answer is not present.
Question B
5 points
Criteria Description
Question B
5. Target
5 points
Answer is thorough.
4. Acceptable
4.35 points
Answer is detailed.
3. Approaching
Answer is present.
3.95 points
2. Insufficient
3.7 points
Answer is present but lacks detail or is incomplete.
1. Unsatisfactory
0 points
Answer is not present.
Question C
5 points
Criteria Description
Question C
5. Target
5 points
Answer is thorough.
4. Acceptable
4.35 points
Answer is detailed.
3. Approaching
3.95 points
Answer is present.
2. Insufficient
3.7 points
Answer is present but lacks detail or is incomplete.
1. Unsatisfactory
0 points
Answer is not present.
Question D
7.5 points
Criteria Description
Question D
5. Target
7.5 points
Answer is thorough.
4. Acceptable
Answer is detailed.
6.53 points
3. Approaching
5.93 points
Answer is present.
2. Insufficient
5.55 points
Answer is present but lacks detail or is incomplete.
1. Unsatisfactory
0 points
Answer is not present.
Mechanics of Writing
2.5 points
Criteria Description
(includes spelling, punctuation, grammar, language use)
5. Target
2.5 points
Writer is clearly in command of standard, written, academic English.
4. Acceptable
2.18 points
Prose is largely free of mechanical errors, although a few may be present. The
writer uses a variety of effective sentence structures and figures of speech.
3. Approaching
1.98 points
Some mechanical errors or typos are present, but they are not overly distracting to
the reader. Correct and varied sentence structure and audience-appropriate
language are employed.
2. Insufficient
1.85 points
Frequent and repetitive mechanical errors distract the reader. Inconsistencies in
language choice (register) or word choice are present. Sentence structure is correct
but not varied.
1. Unsatisfactory
0 points
Surface errors are pervasive enough that they impede communication of meaning.
Inappropriate word choice or sentence construction is used.
Total 25 points
10/16/23, 12:44 PM
Print Preview
Chapter 1: An Overview of Financial Management and the Financial Environment Chapter Review
Book Title: Financial Management: Theory and Practice
Printed By: Alla Khachatryan (AKhachatry1@my.gcu.edu)
© 2020 Cengage Learning, Cengage Learning
Chapter Review
Summary
Financial markets are simply ways of connecting providers of cash with users of
cash. Providers exchange cash now for claims on uncertain future cash.
The three main forms of business organization are the proprietorship, the
partnership, and the corporation. Although each form of organization offers
advantages and disadvantages, corporations conduct much more business than the
other forms.
Going public is called an initial public offering (IPO) because it is the first time the
company’s shares are sold to the general public.
Free cash flow (FCF) is the cash flow available (or free) for distribution to a
company’s investors, including creditors and stockholders, after the company has
made investments to sustain ongoing operations.
The weighted average cost of capital (WACC) is the average return required by all
of the firm’s investors. It is determined by the firm’s capital structure (the firm’s relative
amounts of debt and equity), interest rates, the firm’s risk, and the market’s attitude
toward risk.
The value of a firm depends on the size of the firm’s free cash flows, the timing of
those flows, and their risk. If the expected future free cash flows and the cost of
capital incorporate all relevant information, then a firm’s fundamental value (also
called intrinsic value) is defined by:
The primary objective of management should be to maximize stockholders’ wealth,
and this means maximizing the company’s fundamental value. Legal actions that
maximize stock prices usually increase social welfare.
Transfers of capital between borrowers and savers take place
(1) by direct transfers of money and securities;
(2) by transfers through investment banks, which act as go-betweens; and
https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5932631885006174207026324209&eISBN=9781337909686&id=1930776340&snapshotId=3708…
1/3
10/16/23, 12:44 PM
Print Preview
(3) by transfers through financial intermediaries, which create new
securities.
A financial security is a claim on future cash flows that is standardized and
regulated. Debt, equity, and derivatives are the primary types of financial securities.
Derivatives, such as options, are claims on other financial securities. In
securitization, new securities are created from claims on packages of financial
assets.
The prospect of more money in the future is required to induce an investor to give up
money today. This is a required rate of return from an investor’s perspective and a
cost from the user’s point of view.
Four fundamental factors affect the required rate of return (i.e., the cost of money):
(1) production opportunities,
(2) time preferences for consumption,
(3) risk, and
(4) inflation.
Spot markets and futures markets are terms that refer to whether the assets are
bought or sold for “on-the-spot” delivery or for delivery at some future date.
Money markets are the markets for debt securities with maturities of less than a year.
Capital markets are the markets for long-term debt and corporate stocks.
Primary markets are the markets in which corporations raise new capital. Secondary
markets are markets in which existing, already outstanding securities are traded
among investors.
A trading venue is a site (geographical or electronic) where secondary market trading
occurs.
Orders from buyers and sellers can be matched in one of three ways:
(1) in a face-to-face open outcry auction,
(2) through a computer network of dealer markets, and
(3) through automated trading platforms with computers that match orders
and execute trades.
https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5932631885006174207026324209&eISBN=9781337909686&id=1930776340&snapshotId=3708…
2/3
10/16/23, 12:44 PM
Print Preview
Registered stock exchanges (like the NYSE or NASDAQ) must display pre-trade
quotes. Broker-dealer networks and alternative trading systems (ATS) (which are
called dark pools) conduct off-exchange trading and are not required to display pretrade information.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in
2010 in an effort to prevent financial crises such as the one that triggered the Great
Recession of 2007.
Web Extension 1A discusses derivatives.
Chapter 1: An Overview of Financial Management and the Financial Environment Chapter Review
Book Title: Financial Management: Theory and Practice
Printed By: Alla Khachatryan (AKhachatry1@my.gcu.edu)
© 2020 Cengage Learning, Cengage Learning
© 2023 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means graphic, electronic, or mechanical, or in any other manner – without the written permission of the copyright holder.
https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5932631885006174207026324209&eISBN=9781337909686&id=1930776340&snapshotId=3708…
3/3
Purchase answer to see full
attachment
