ID: A Name 11Which of the following tatcments is CORRECT The NYSE does not esist as a plysical location Rather it represents a loose collection of dealers who trade stock electronically An esample of a primary market transaction would be your uncle transferring 100 shares of Walmart stock so you as a birthday gift. Capital market instruments include both long-term debt and common stocks tf your uncle in New York sold 100 shares of Microsoft through his broker to an imvestor in Los Angeles, this would be a primary market transaction While the two frequently perform sinmilar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companie raise large blocks of capital from investors Which of the following is a primary market transaction You sell 200 shares of IBM stock on the NYSE through your broker h 12 You bay 200 shares of IBM stock from your brother. The trade is not made through a broker-you just give him cash and be gives you the stock lisM issues 2.000,000 shares of new stock and sells them to the public theough an investment banker One financial institution buys 200,000 shares of IBM stock froms another institution. An investment banker arranges the transaction IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years. d Money markets are markets for a Foreign currencies. Consumer automobile loans 13 b. Common stocks d Long-term bonds Short-term debt securities such as Treasury bills and commercial paper You recently sold 200 shares of Disney stock, and the transfer was made through a bec er. example of A money market transaction A primary market transaction A secondary market transaction. A futures market transaction 14. This is an d An over-the-counter market transaction. 15. Which of the following statements is CORRECT While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties The NYSE operates as an auction market, whereas Nasdaq is an example of a dealer market Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks Money markets are markets for long-term debt and common stocks A liquid security is a security whose valure is derived from the price of some other "underlying" asset d Name 16. Which of the following statements is CORRECT? The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders' eouity b. a The balance sheet gives us a picture of the firm's financial position at a point in time. The income statement gives us a picture of the firm's financial position at a point ir c. time The statement of cash flows tells us how much cash the firm must pay out in interest during the year The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year d e. 17. Which of the following statements is CORRECT Assets other than cash are expected to produce cash over time, and the amounts of cash they eventually produce should be exactly the same as the amounts at which the assets are carried on the books. The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows, The annual report is an internal document prepared by a firm's managers solely for the use of its creditors/lenders d. a c. The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and statement of stockholders' equity. Prior to the Enron scandal in the carly 2000s, companies would put verbal information in their annual reports, along with the financial statements. That verbal information was often misleading, so today annual reports can contain only quantitative information-audited financial statements 18. Which of the following statements is CORRECT? The balance sheet for a given year, say 2011, is designed to give us an idea of what happened to the firm during that year a The balance sheet for a given year, say 2011, tells us how much money the company b. earned during that year The difference between the total assets reported on the balance sheet and the liabilities reported on this statement tells us the current market value of the stockholders' equity assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP) If a company's statements were prepared in accordance with generally accepted accounting principles (GAAP), the market value of the stock equals the book value of the stock as reported on the halance sheet. The assets section of a typical industrial company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last