D076 WGU Finance Skills for Managers TEST PASSED

What is a reasonable alternative to keeping an emergency stash of cash? Investing in a savings account Investing in a readily withdrawable account that still earns some interest is a value-preserving alternative. 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 is the area of finance that deals with uses and sources of funding to increase the value of the firm. 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 is the area of finance that seeks to create wealth in the future by deciding where to allocate money. What is the primary goal of the financial manager of a firm? To maximize owner wealth. The financial manager should make decisions based on the primary goal of maximizing 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? For any investment, you should expect to receive a benefit worth at least as much as the initial cost. What is the primary aim of personal finance goals? To maximize satisfaction from products purchased and services obtained. The objective of personal financial goals is to maximize one's utility. 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. The manager is deciding where to get the funds to support a new project, which means the manager is making a financing decision. Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? Private equity deals with investments in firms that are privately held and whose ownership is not yet bought or sold on any public stock exchange. Which task does a financial manager perform when assessing the costs and benefits of potential projects? Making investment decisions Managing working capital means overseeing day-to-day operations and cash flows. What tool can you use to understand your overall personal cash flows? Budgeting helps you to understand your income and expenses and to analyze your cash flows. 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 Part of the personal finance process is figuring out how to finance your goals in a way that is within your means What area of finance involves deciding which assets to invest in to create wealth in the future? Investments Investments are an area of finance that involves deciding which assets to invest in to create wealth in the future. 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 Since the project has already been approved, Hannah is trying to find a way to finance the investment and considering its capital structure.