"Has been a lifesaver so many times!"
- Catherine Rampell, student @ University of Washington
"Exactly the help I needed."
- Jennifer Hawes, student @ San Jose State
"The best place for brainstorming ideas."
- Michael Majchrowicz, student @ University of Kentucky
14-1. What are financial markets? What function do they perform? How would an economy be worse off without them?
Financial markets are institutions and procedures that facilitate transactions in all types of financial securities Examples are stocks, bonds, mutual funds.
They serve to distribute the savings supply in the economy to the demanders of the savings. If the financial markets did not exist, the wealth of the economy would decrease and the rate of capital formation would not be as high.
14-3. Distinguish between the money and capital markets.
The primary difference between money and capital markets is maturity period of the securities traded in them. The money market handles transactions within the short-term credit instruments while the capital market handles transactions in long-term financial instruments. Typically, a maturity period above one year would be categorized long-term, and less than one year would be categorized short-term.
14-4. What major benefits do corporations and investors enjoy because of the existence of organized security exchanges?
Corporations and investors enjoy three main benefits from organized security exchanges. The first is a continuous market, which leads to continuous security prices. It also establishes and publishes fair security prices based on supply and demand rather than bargaining. Organized security exchanges also help business? raise new capital because the secondary market makes it easier for firms to float new security offerings successfully.
15-12A. (Break-even point) You are a hard-working analyst in the office of financial operations
for a manufacturing firm that produces a single product. You have developed the following cost
structure information for this company. All of it pertains to an output level of 10 million units.
Using this information, find the break-even point in units of output for the firm.
Return on operating assets 25%
Operating asset turnover 5 times
Operating assets $20 million
Degree of operating leverage 4 times
15-13A. (Break-even point and operating leverage) Allison Radios manufactures a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison Radios
View Full Essay
Financial markets, Capital market, Security, Money market, Leverage, Financial capital, Securities market, Financialization, operating asset turnover, money and capital markets, maturity period, security exchanges, security offerings, stocks bonds, operating assets, continuous security, credit instruments, security prices, continuous market, financial securities, manufacturing firm, capital formation, break even point, financial instruments, money market, financial markets, new security, 12a
More Free Essays Like This