D076 Quiz Answers

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? Financial institutions Business finance Investments Real estateBusiness 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? Accounting focuses on the future, while finance is generally backward-looking. Finance provides financial data to decision makers, and accounting involves making decisions using that data. Accounting involves investing and forecasting, while finance summarizes a company's financial information.Finance focuses on the future, while accounting is generally backward-looking. Finance is the management and allocation of capital with the objectives of investing, forecasting, budgeting, saving, lending, and borrowing. Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? Accounting Financial institutions Capital structure InvestmentsInvestments. 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 minimize the asset holdings of the firm To minimize the costs of the firm To maximize owner wealth To maximize the manager's utilityTo 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 Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project? Making credit standard decisions Making investment decisions Making inventory control decisions Making financing decisionsMaking 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 Financial planning Insurance Corporate financePrivate 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? Managing working capital Making financing decisions Making investment decisions Implementing financial policiesMaking investment decisions. Understanding how benefits weigh up against costs is the first priority before moving forward with financing and managerial decisions. What tool can you use to understand your overall personal cash flows? Setting financial goals Budgeting Investing SavingBudgeting helps you to understand your income and expenses and to analyze your cash flows. What is a reasonable alternative to keeping an emergency stash of cash? Investing in a savings account Investing the money in a nicer car Investing in high-risk growth stocks Investing in long-term bondsInvesting in a savings account. Investing in a readily withdrawable account that still earns some interest is a value-preserving alternative. 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? Analyzing data Financing Assessing InvestingFinancing. 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 Organizational finance Financial institutions Investment bankingInvestments 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 an investment decision Managing financial investments Managing working capital Making a financing decisionMaking 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. 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 minimize personal expenses To set priorities in personal finances To maximize individual utility To make personal finances predictableTo maximize individual utility. While everyone has different personal financial goals, the objectives of such goals is to maximize individual utility.