D076 Finance Skills for Managers

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56 terms trav Which area of finance deals with sources of funding and the capital structure of corporations and seeks to increase the value of a firm to its owners?Business finance What is the primary difference between finance and accounting?Finance focuses on the future, while accounting is generally backward-looking.Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns?Investments What is the primary goal of the financial manager of a firm?To maximize owner wealth What should be the main question a firm asks when considering any investment decision?Do the benefits of this investment outweigh the costs?What is the primary aim of personal finance goals? To maximize satisfaction from products purchased and services obtained Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project?Making financing decisions Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange?Private equity

Which task does a financial manager perform when assessing the costs and benefits of potential projects?Making investment decisions What tool can you use to understand your overall personal cash flows?Budgeting What is a reasonable alternative to keeping an emergency stash of cash?Investing in a savings account You want to buy a house, so you obtain a mortgage for which you can afford the monthly payments. What process have you engaged in as part of your financial decision-making?Financing What area of finance involves deciding which assets to invest in to create wealth in the future?Investments Which professional works with individuals to help them achieve their financial goals?Financial planner Hannah is the financial manager of a firm. A project that she has recommended has been approved and will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out how to raise enough money to start the project. She can choose whether to issue new bonds, new stocks, a mortgage loan, or some combination of those options. What task is Hannah performing in this scenario?Making a financing decision Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to reach their goal of taking their children to visit their grandparents in Spain next summer. What is the objective of setting such a goal?To maximize individual utility Omar is about to purchase a new car for $30,000. He knows he wants to buy the car, but he is still trying to decide how to pay for it. He has barely over $30,000 in his bank account. He can either take out an auto loan from a bank or use a mix of cash and an auto loan.Financing a goal What are the purposes of financial markets?To provide liquidity and determine prices In which financial market are securities such as stocks and bonds are traded after their initial issuance?Secondary market What kind of market primarily allows institutions to borrow and lend in the short term?Money market What is the primary role of financial institutions? To conduct financial transactions such as investments, loans, and deposits

A local start-up company just hit its five-year anniversary and is planning an initial public offering sometime this year. In order to issue public stock, which market will the company use?Primary market What is a depository institution?An institution that accepts and pays interest on deposits of money, as well as extends loans Which financial institution ensures that a nation's economy remains healthy by controlling the amount of money circulating in the economy?Central bank How do insurance companies pay policyholders when a claim is made?They use returns from stocks and bonds.Which type of financial institution deals mainly with providing for retirement through employers?Pension fund A large corporation is looking to merge with another large corporation. Which financial institution can help them do this?Investment bank Unemployment rate is which type of economic indicator? Lagging What would an inverted yield curve signal?It may indicate an economic downturn.The Federal Reserve sometimes adjusts the interest rate at which commercial banks can borrow from it. What is the purpose of adjusting the interest rate?To regulate inflation and unemployment In what way are coincident indicators useful?They are analyzed during economic shifts to provide information about the current state of the economy.Which responsibility is a focus of the U.S. Securities and Exchange Commission?To protect investors Which type of financial institution provides individuals and firms access to financial markets?Investment institutions Which financial institution includes entities that receive money from institutional investors and wealthy individuals to buy troubled companies to improve them and earn returns by selling them or going public?Private equity Yield curve is which type of economic indicator? Leading Which term reflects a person's beliefs about right and wrong, good and bad, or just and unjust?Moral

About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note has an interest rate of 2.28%. What does this information indicate about the future economy?It may indicate an economic downturn.What characterizes an ethical action?An ethical action is based on accepted standards of conduct.Lucas is a financial advisor working for Bullzai, Inc. He is faced with a dilemma. Bullzai has started changing its practices in order to increase profit. As a financial advisor, he is now supposed to suggest to clients to invest in portfolios that will not do as well as the portfolios that Bullzai is invested in. This is an accepted practice done by other businesses in the industry, and it complies with all standards set by the government. However, Lucas knows that this practice is not in his clients' best interest. What type of dilemma is Lucas facing?Moral Which type of error would result in a set repercussion or penalty given by the government?Legal Nora is an investment manager, which means that she is paid to invest other people's money. To meet her goal for the month, she is seeking to invest money from clients in an investment that is risky but potentially has a higher return. What about this situation represents an ethical dilemma?Nora is considering investing in a risky asset just to meet her monthly goal.What are the effects of attempting to maximize shareholder value for a business in an unethical way?It often leads to decreased shareholder value for the business.Endothon Company has decided to move its production from the United States to a foreign country. Which situation below would constitute an unethical action by the company?Saving money by paying inadequate wages to workers overseas Why would bondholders set bond contracts that are very strict to deter the company from taking on risky projects?Bondholders are primarily interested in making sure they will be paid back.Which kind of projects are bondholders interested in? Safe projects with a higher chance of providing sufficient compensation Which scenario is an example of an agency problem? A manager purchases a company car and allocates it as a company expense.How can agency costs be mitigated?Aligning managers' interests with shareholders' interests What is the third step in finding a solution to an ethical dilemma?Consider all stakeholders involved What does the term legal describe?An action that is in accordance with the laws and rules set by an authority.