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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 for more than one year.

• TRUE

• FALSE

Stockholders expect to earn higher rates of return on investments of lower risk and lower rates of return on investments of higher risk.

• TRUE

• FALSE

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

• TRUE

• FALSE

When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that expected to maximize shareholder value.

• TRUE

• FALSE

High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price.

• TRUE

• FALSE

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.

• TRUE

• FALSE

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

• TRUE

• FALSE

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

 

• TRUE

• FALSE

Cash needed to facilitate the normal transactions of the business, that is, to carry out its purchases and sales activities.

• Transaction Motive

• Speculative Motive

• Precautionary Motive

• Contractual Motive

A company may be required by a bank to maintain a certain compensating balance in its demand deposit account as a condition of a loan extended to it.

• Transaction Motive

• Speculative Motive

• Precautionary Motive

• Contractual Motive