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Principles of Finance

Review Questions

Principles of FinanceReview Questions

1 .
Identify and briefly define the three areas of study in finance.
2 .
Identify the three focal areas in business finance.
3 .
Define each of the following types of risk:
  • inflation risk
  • diversifiable risk
  • non-diversifiable risk
  • political risk
4 .
Identify three common components of good financial planning.
5 .
The Concepts in Practice feature in Section 1.3 discusses the importance of data for decision-making. List at least three of the ways the article suggests managers can use financial statements.
6 .
Describe the role of a financial analyst in a financial institution such as a bank or investment company.
7 .
Is a dealer or a broker more likely to be a market maker? In your answer, define the activities of a market maker.
8 .
How can an understanding of micro- and macroeconomic factors aid in small business decision-making?
9 .
We measure market capitalization by multiplying the number of shares of stock outstanding by the current price per share. Go to and determine the market capitalization of Nike, Tesla, and Walmart. Which company has the greatest market capitalization? Which company has the highest level of sales? If these are not the same companies, why do you think the company with the lower sales level has greater market capitalization?
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