D076- ALL UNIT TESTS

D076- ALL UNIT TESTS

4.8 (4 reviews) Students also studied Terms in this set (201) Social SciencesEconomics Finance Save d076 after fail OA 31 terms llarra5Preview WGU D076 Finance Skills for Manag...375 terms infinitedrifterPreview Finance Skills for Managers - D076 200 terms Rampaging_Apostro... Preview

(TEST)

56 terms trav What are the main services offered by financial institutions?Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial transactions What is the main objective of personal financial goals? To maximize individual utility Which task does the financial manager of a firm perform that involves the issuance of new stocks and bonds?Making financing decisions Why is understanding the definition of finance important in managing personal finances?It helps individuals compare the costs and benefits of an action to determine whether to take that action.In which type of market would a company issue bonds or stocks for the first time?Primary market Which type of financial institution is a mutual fund? Investment institution Which financial institution specializes in managing and administering retirement funds?Pension funds Which type of economic indicator is the consumer price index?Lagging indicator What does the term ethical refer to?The accepted standards of conduct that guide a person's behavior

A company's officers and board of directors are selling their stocks in the firm at higher prices due to false accounting reports that made the stock seem more valuable than it truly was. Which ethical issue is occurring in this situation?Agency problem due to conflicting interests Which area of finance involves deciding which assets to invest in to create wealth in the future?Investments What is the main goal of a firm?To maximize owner wealth What are financial managers doing if they evaluate whether it is worth spending money on research and development for a new product?Making an investment decision Which type of financial market is where securities such as stocks and bonds are traded after their initial issuance?The secondary financial market What type of financial institution is an insurance company?Contractual Which financial institution invests funds contributed by a company to provide retirement funds for the company's employees?Pension fund Personal income is which type of economic indicator? Coincident Which term refers to something that conforms with accepted standards of conduct that guide a person's behavior?Ethical What is the second step in finding a solution to an ethical dilemma?Consider alternative courses of action Which type of interest rate includes interest on interest in addition to interest on the principal?Compound interest How can agency problems be reduced through corporate control?Executive compensation What is the rate at which the average price level of particular goods and services in an economy increases over a period of time?Inflation rate You signed an apartment contract today. You are going to pay $1,500 at the beginning of each month for the next 12 months, starting today. What type of cash flows is this contract?An annuity due

What is the term for the return over the entire period that an investor owns a financial security?Holding period return What is used to measure total risk?Standard deviation What is the term for the risk that changes in interest rates will impact the value of a bond?Interest rate risk What is another name for the cost of capital?Discount rate What is the name for the minimum rate of return that an investor or lender will accept for investments?Required rate of return The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest rate?5% Which action reduces the future value of cash flows? Receive all cash flows later than expected.How is risk defined in finance?The possibility that the realized or actual return will differ from what we expect Which example below is considered a market risk factor? An unexpected change in interest rate occurs.Why are ratios useful for analyzing and comparing company performance between firms of different sizes?They provide standardization.You are the financial manager of a firm. The firm is small and is struggling to collect cash from accounts receivable. Also, due to the nature of industry, inventories are illiquid. To make sure that the firm has enough cash holdings for short-term obligations, you decide to create a new ratio of cash to short-term obligations. What is this scenario an example of?Flexibility Why are activity ratios also called efficiency ratios or asset use efficiency ratios?Because they measure how well a company uses its assets to generate sales or cash.What type of ratio is used to consider how a firm is financed and to assess a firm's ability to pay interest and pay back long-term obligations?Financing ratios What does a net margin of 7% indicate?For every dollar of revenue, 7 cents remain for the equity holders after all other costs are covered.Firm A has an average collection period of 67 days, and the industry norm is 40 days. What can the firm do in order to be competitive with accounts receivable management in the industry?Tighten the credit standards for its customers.What is the difference between the current ratio and the quick ratio?Inventory is excluded in the calculation of the quick ratio.

Which term is used to describe the stock of a firm with market-to-book ratio of less than 1?Value stock What does inventory turnover assess?The inventory management of a firm You are comparing the return on equity of Firm 1 and Firm 2. Both firms have an identical profit margin and asset turnover, but Firm 1 has an overall higher return on equity. What must be true?Firm 1 is using a higher proportion of debt to finance its operations.Which method of ratio analysis looks at a firm's performance over time?Trend analysis You are a financial analyst of an investment bank, and you are doing research on equity. You are looking at a book publisher's financial ratios in comparison to its competitors and the industry average. What is this an example of?Cross-sectional analysis Which type of ratio are suppliers interested in? Liquidity ratios What is the ratio that tells you on average how long it takes for a firm to collect accounts receivable?Average collection period What does a debt ratio of 40% indicate?It indicates that 40% of assets are financed by debt.What is operating margin useful for?Comparing the profitability of firms with different capital structures What does an average collection period of 70 tell you? On average, a firm takes 70 days to collect accounts receivable.What does high inventory turnover relative to the industry and competitors indicate?The firm does not hold enough inventory and is making its customers wait longer to receive their purchased goods.What is the difference between return on assets (ROA) and return on equity (ROE)?ROE considers the capital structure of a company, while ROA does not.MiniCo recently spun off of BigCo. Both companies have the same leverage and asset turnover ratios, but MiniCo is underperforming on its return on equity to shareholders. If MiniCo would like to improve its return on equity, which action would help?Reduce costs to improve its overall profitability.What is the name for a forecast of short-term events that helps a company understand if it has sufficient cash?Cash budget What is the purpose of a monthly cash budget? To control cash inflows and outflows so you can balance income with expenditures and savings In which situation would a firm need to borrow cash? When the beginning cash balance plus the net cash is less than the minimum cash balance required for the month