WGU D076 PA 4

D076 PA

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Pre-OA: Question 59

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56 terms trav In which way is accounting different from finance?Accounting forecasts future performance, given the past, while finance records past performance.Accounting is backward looking, while finance is focused on the future.Accounting is focused on allocating capital, while finance is focused on bringing in capital.Accounting is about budgeting, saving, and borrowing, while finance is about investing, forecasting, and lending.Accounting forecasts future performance, given the past, while finance records past performance.What is the main question that both individuals and companies must consider when making financial decisions to reach a goal?Will this decision require debt or equity financing?Will this decrease the amount of cash available?Will the benefits of the action outweigh the costs?Will utility be maximized through this decision?Will the benefits of the action outweigh the costs?A financial manager at a company is trying to determine whether to issue new stocks or new bonds to cover the costs of a project the company is doing the next year.Which main task in business finance is this situation an example of?Making financing decisions Managing working capital Making investment decisions Managing interdepartmental loans Making financing decisions

How can investing help a person reach personal financial goals?It ensures money is placed in a safe, risk-free, and easily accessible financial asset.It helps a person understand how money was spent previously in order to reliably predict future expenses.It provides access to potential revenue or increases in value to help meet goals faster.It provides a guaranteed future outcome in order to predictably meet financial goals.It provides access to potential revenue or increases in value to help meet goals faster.A sign company is planning to have an initial public offering (IPO). In which type of market will its stock first be sold to the public?Primary market Efficient market Money market Secondary market Primary market Which type of economic indicator changes after the economy changes and helps identify trends in the long term?Coincident indicator Leading indicator Lagging indicator Yield curve indicator Lagging indicator How does an investment institution, such as a mutual fund, facilitate the circulation of money in the economy?By providing individuals and firms access to financial markets to buy or sell financial securities By raising capital on a contractual basis, such as an insurance contract By accepting deposits of money, paying interest on deposits, and providing loans to individuals and organizations By insuring deposits in investment accounts up to $250,000 to promote public confidence By providing individuals and firms access to financial markets to buy or sell financial securities Which type of economic indicator is used by governments and policymakers to implement or alter policies in an effort to avoid or minimize the effects of an economic downturn?Lagging indicator Coincident indicator Correlated indicator Leading indicator Leading indicator

Suppose an individual does not eat chocolate because eating chocolate goes against his personal beliefs. Which type of standard is this?Legal Financial Moral Ethical Moral Which action is based upon moral standards?Although there is no company policy regarding it, a financial manager chooses not to accept gifts from the company's clients to ensure that she does not create a conflict of interest.As mandated by government regulations, a financial manager files a registration statement with the U.S.Securities and Exchange Commission (SEC) before offering equity securities for sale.Since it is generally accepted in the company that no personal information about clients should be released without written permission, a financial manager denies the request for a third party to access its data.As outlined in the company's policies, a financial manager hires a third-party entity to review all annual report filings to ensure they are compliant with applicable generally accepted accounting principles (GAAP).Although there is no company policy regarding it, a financial manager chooses not to accept gifts from the company's clients to ensure that she does not create a conflict of interest.What should a potential bondholder (lender) do to prevent a company (borrower) from taking on risky projects?Set strict covenants that the company cannot uphold if it chooses a risky project Separate owners from management so their interests do not conflict Encourage manipulation of accounting procedures to optimize the company's profit Release managers who do not attempt to maximize immediate shareholder value Set strict covenants that the company cannot uphold if it chooses a risky project What is the term for an individual's beliefs concerning what is and is not acceptable to personally do?Honesty Ethics Laws Morals Morals Which factor contributes to the inflation of the prices of goods and services over time?Increase in demand for goods and services Decrease in employee demand for higher wages Decrease in costs of production Increase in purchasing power of goods and services Increase in demand for goods and services

Why can compounding interest be a good tool but also a significant detriment?Compounding interest can be a good tool because it allows a lender to gain interest on interest, but it is a detriment because it causes a borrower to pay interest on interest.Compounding interest can be a good tool because it summarizes the required return, but it is a detriment because it requires a larger cost of capital.Compounding interest can be a good tool to understand the time value of money, but it is a detriment because it does not take inflation into account.Compounding interest can be a good tool to understand opportunity cost, but it is a detriment because it does not take risk into account.Compounding interest can be a good tool because it allows a lender to gain interest on interest, but it is a detriment because it causes a borrower to pay interest on interest.Which component of the required rate of return takes into account the loss of potential gain from other alternatives?Hurdle rate Risk Inflation Opportunity cost Opportunity cost How is inflation calculated?Inflation is calculated by determining the rate at which the average price level of particular goods and services increases over a period of time in an economy.Inflation is calculated by determining the rate at which the demand for particular goods and services has increased over a period of time in an economy.Inflation is built into the economy and will rise as employees receive salary raises.Inflation is determined by the federal government at a target rate of 2% a year.Inflation is calculated by determining the rate at which the average price level of particular goods and services increases over a period of time in an economy.Based on the following information about the stocks of several companies, which stock displays the greatest amount of risk?

Stock A: Return = 22.22%, Standard Deviation = 9.99%

Stock B: Return = 15.05%, Standard Deviation = 7.35%

Stock C: Return = 38.83%, Standard Deviation = 4.54%

Stock D: Return = 5.69%, Standard Deviation = 5.32%

Stock A Stock B Stock C You Selected Stock D Stock A