Business IQ - Test Your Finance, Vocabulary, Investing Knoweldge

A subsidiary is a company that is owned by another company, known as the parent company. The parent company usually holds a majority of the subsidiary's shares, giving it control over the subsidiary's operations and decision-making processes. Subsidiaries are separate legal entities from their parent companies, with their own management and financial statements. They are often established to expand the parent company's business into new markets or industries, or to isolate certain assets or liabilities.

The correct answer is "SUM". In Excel, the SUM function is used to add up the values in a range of cells. By selecting the cells you want to add together and using the SUM function, Excel will calculate the total sum of those cells. This is a commonly used command in Excel for performing calculations and obtaining the total of a set of numbers.

Laissez-faire is an economic system that advocates for minimal government intervention in the economy. In a laissez-faire system, businesses are free to operate without government regulations and individuals have the freedom to pursue their own economic interests. Capitalism aligns with the principles of laissez-faire as it promotes private ownership of resources and businesses, competition, and free markets. In a capitalist system, the government's role is limited to enforcing property rights and contracts, rather than controlling or directing economic activities. Therefore, capitalism is the economic system that best fits the description of laissez-faire.

Many offshore companies and hedge funds are incorporated in the Cayman Islands due to its favorable tax laws and regulations. The Cayman Islands offer a tax-neutral environment, with no corporate or income taxes for offshore entities. This makes it an attractive destination for businesses looking to minimize their tax liabilities and maximize their profits. Additionally, the Cayman Islands provide a stable and secure financial system, making it a preferred choice for investors and financial institutions.

The investor owns 1/3,000th of the company, which means he owns 1 share for every 3,000 shares. Since there are 15 million shares outstanding, we can calculate the number of shares the investor owns by dividing 15 million by 3,000. This equals 5,000 shares.

The correct answer is "cash flows". When a company releases its financial statements, it includes the income statement, balance sheet, and the statement of cash flows. The statement of cash flows provides information about the cash inflows and outflows of a company during a specific period. It helps investors and stakeholders understand how the company generates and uses its cash, providing insights into its liquidity and financial health.

Berkshire Hathaway is a conglomerate because it is a multinational conglomerate holding company that owns a diverse range of businesses. It has subsidiaries in various industries such as insurance, utilities, manufacturing, and retail. This diversification of businesses under one parent company is a characteristic of a conglomerate. Microsoft, Southwest Airlines, and Chevron, on the other hand, are not conglomerates as they primarily operate within specific industries.

The correct answer is Bloomberg because it is a well-known terminal that is commonly used by professionals in the financial industry, including those on Wall Street. Linux, IBM, and Dell are also technology companies, but they are not specifically known for their presence on Wall Street desks like Bloomberg is.

The 80-20 rule, also known as the Pareto Principle, states that roughly 80% of the effects come from 20% of the causes. This principle is commonly observed in various fields such as business, economics, and productivity. It suggests that a small portion of inputs or efforts often yield a large portion of the results or outcomes. The Pareto Principle helps in identifying and prioritizing the most significant factors or contributors to a particular outcome or problem.

Mark Cuban is the correct answer because he is a Dallas billionaire who sold his company, Broadcast.com, to Yahoo for $6 billion during the dot-com bubble. He is known for his success as an entrepreneur and his investments in various industries. T Boone Pickens is an oil tycoon, Jerry Jones is the owner of the Dallas Cowboys, and Jerry Yang is one of the co-founders of Yahoo.

Oracle is considered the world leader in database software because it is one of the largest and most well-known companies in the database software industry. It offers a wide range of database products and services that are used by businesses and organizations around the world. Oracle has a strong reputation for its reliability, scalability, and security features, making it a popular choice for large enterprises. Additionally, Oracle has a long history in the database software market and has consistently been at the forefront of innovation in this industry.

Standard Oil is an example of a monopoly because it was a dominant company in the oil industry during the late 19th and early 20th centuries. It controlled a significant portion of the market and had a monopoly over the production, refining, and distribution of oil. Standard Oil used aggressive tactics such as predatory pricing and vertical integration to eliminate competition and maintain its monopoly power. The company's dominance eventually led to its breakup in 1911 due to antitrust laws.

Benjamin Graham is the correct answer because he was a mentor to Warren Buffet. Graham, known as the "father of value investing," taught Buffet the principles of investing and greatly influenced his investment strategy. Buffet often credits Graham for his success and considers him one of the most important figures in his life. Therefore, it is clear that Benjamin Graham was Warren Buffet's mentor.

Andrew Carnegie made his fortune in the steel industry. He was a prominent figure in the late 19th century and early 20th century, known for his leadership in the expansion of the American steel industry. Carnegie founded the Carnegie Steel Company, which became one of the largest and most profitable steel companies in the world. His success in the steel industry allowed him to amass a vast fortune and become one of the wealthiest individuals in history.

Japan experienced a massive economic bubble in the 1980s, known as the "bubble economy," which was characterized by soaring stock and real estate prices. However, this bubble burst in the early 1990s, leading to a prolonged period of economic stagnation and deflation, commonly referred to as the "lost decade." During this time, Japan faced issues such as bank failures, high unemployment rates, and a decline in consumer spending. This period of economic decline had a significant impact on the country's economy and has been studied as a cautionary tale for other nations.

The share price of a company can be calculated by dividing the market capitalization by the number of shares. In this case, the company has a market cap of $2 billion and 1 million shares. Dividing $2 billion by 1 million gives us a share price of $2000.

The quarterly earnings per share can be calculated by dividing the annual earnings by the number of shares and then dividing the result by 4 (since there are 4 quarters in a year). In this case, $1 million divided by 10 million shares is $0.10 per share. And $0.10 divided by 4 is 0.025, which is equal to 2.5 cents per share.

Houston is known as the energy capital of the world and is home to a large number of energy companies. It has a strong presence in the oil and gas industry, with many major companies having their headquarters or significant operations in the city. This concentration of energy companies in Houston makes it the city with the most energy companies compared to Chicago, New York, and Los Angeles.

Michael Milken is known as the "junk bond king" because he played a significant role in popularizing and expanding the market for high-yield, high-risk bonds in the 1980s. He was a key figure at the investment bank Drexel Burnham Lambert, where he developed and implemented innovative financial strategies that allowed companies with low credit ratings to raise capital through the issuance of high-yield bonds. Milken's efforts revolutionized the corporate finance industry, but he was later involved in a major insider trading scandal and was convicted of securities fraud.

Warren Buffett owns Geico because it is listed as one of the companies he owns in the given list.

Jim Rogers and George Soros founded the Quantum Fund. The Quantum Fund is a well-known hedge fund that was established in 1973. It was one of the first hedge funds to use a global macro investing strategy, which involves making bets on macroeconomic trends and events. The fund became highly successful and made both Rogers and Soros extremely wealthy. They eventually went on to pursue their own separate investment careers, but the Quantum Fund remains a significant part of their legacy in the financial industry.

Long Term Capital Management (LTCM) is the correct answer because it fits the description of a highly leveraged hedge fund that collapsed and lost billions in the 1998 Asian Financial crisis. LTCM was founded by Nobel laureates and was known for its use of complex mathematical models to make investment decisions. However, its highly leveraged positions and excessive risk-taking led to significant losses during the financial crisis, ultimately resulting in the fund's collapse.

H.L. Hunt made his fortune in the oil industry. This is evident from his success and wealth accumulation. The oil industry is known for its potential to generate enormous profits, and many individuals, including H.L. Hunt, have become extremely wealthy through their involvement in this sector.

Apartment buildings, shopping malls, and office buildings are typically large-scale properties that require significant investment and management. These types of properties are commonly owned by Real Estate Investment Trusts (REITs). REITs are companies that own, operate, or finance income-generating real estate. They allow individuals to invest in real estate without directly owning the properties themselves. REITs are attractive to investors because they offer the potential for regular income through rental payments and the potential for capital appreciation. Additionally, REITs are subject to certain tax advantages, such as not being taxed on corporate income if they distribute at least 90% of their taxable income to shareholders.

San Francisco is not a major port because it does not have the same level of international trade and shipping activity as the other options. Rotterdam is one of the largest ports in Europe and a major hub for global trade. Singapore is a major port in Southeast Asia and one of the busiest in the world. Hong Kong is also a major port and a crucial gateway for trade in Asia. However, San Francisco does not have the same level of maritime trade and infrastructure, making it the correct answer.

Private equity funds are a type of investment fund that specializes in buying and taking control of companies. They use a strategy called leveraged buyouts, which involves using borrowed money to acquire a company with the intention of improving its financial performance and selling it at a profit. Hedge funds, venture capital funds, and mutual funds are not specifically focused on leveraged buyouts of companies, making private equity funds the correct answer.

The annual yield is calculated by dividing the dividend payout by the total value of shares and multiplying by 100. In this case, the dividend payout is $100 million and the total value of shares is $20/share * 500 million shares = $10 billion. Dividing $100 million by $10 billion and multiplying by 100 gives an annual yield of 1%.

The Black Scholes model is a mathematical formula used to calculate the theoretical price of options. It takes into account factors such as the underlying asset's price, the strike price, the time to expiration, the risk-free interest rate, and the volatility of the underlying asset. Therefore, the correct answer is options, as the Black Scholes model is specifically designed to value options.

The long-term capital gains tax rate in the USA is 15%. This means that individuals who hold investments for more than a year and then sell them at a profit will be taxed at a rate of 15% on the gains they made. This rate is lower than the ordinary income tax rate, which encourages long-term investment and potentially stimulates economic growth.

The leasing option and the buying option have the same cost. This means that the total amount of money spent on either option would be equal. Therefore, there is no financial advantage to choosing one option over the other in terms of cost.