Financial Institutions, Markets and Instruments (ABM_BF12-IIIa-2-5)

1. To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return.

2. Dividend payments change directly with changes in earnings per share.

3. The wealth of corporate owners is measured by the share price of the stock.

4. Financial markets are intermediaries that channel the savings of individuals, businesses, and government into loans or investments

5. The money market involves trading of securities with maturities of one year or less while the capital market involves the buying and selling of securities with maturities of more than one year.

6. Primary and secondary markets are markets for short-term and long-term securities, respectively.

7. Holders of equity have claims on both income and assets that are secondary to the claims of creditors.

8.Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any interest to outstanding bonds

9. Commercial banks obtain most of their funds from borrowing in the capital markets.

10. Credit unions are the largest type of financial intermediary handling individual savings.

11.A mutual fund is a type of financial intermediary that obtains funds through the sale of shares and uses the proceeds to acquire bonds and stocks issued by various business and governmental units.

12. IPO stands for Interest and Principal Obligation

13. Suppliers of funds or the holders of the securities may decide to sell the securities that have previously been purchased through secondary markets

14. Money markets are venues  where temporarily idle funds are invested and likewise temporary financing can be acquired

15. Holders of preferred stocks are given priorities over common stocks  in terms of claims over the assets of a company.