D076 Test Answers.

D076 TEST ANSWERS



In00which00way00is00accounting00different00from00finance?
Accounting00is00backward00looking,00while00finance00is00focused00on00the00future.
Accounting00is00focused00on00allocating00capital,00while00finance00is00focused00on00bring
ing00in00capital.
Accounting00is00about00budgeting,00saving,00and00borrowing,00while00finance00is00about0
0investing,00forecasting,00and00lending.00-00ans--
✔✔Accounting00is00backward00looking,00while00finance00is00focused00on00the00future.

What00is00the00main00question00that00both00individuals00and00companies00must00conside
r00when00making00financial00decisions00to00reach00a00goal?
Will00the00benefits00of00the00action00outweigh00the00costs?
Will00this00decision00require00debt00or00equity00financing?
Will00utility00be00maximized00through00this00decision?00-00ans--
✔✔Will00the00benefits00of00the00action00outweigh00the00costs?

A00financial00manager00at00a00company00is00trying00to00determine00whether00to00issue00
new00stocks00or00new00bonds00to00cover00the00costs00of00a00project00the00company00is00
doing00the00next00year.
Which00main00task00in00business00finance00is00this00situation00an00example00of?
Making00financing00decisions
Making00investment00decisions
Managing00interdepartmental00loans00-00ans--✔✔Making00financing00decisions

How00can00investing00help00a00person00reach00personal00financial00goals?
It00provides00access00to00potential00revenue00or00increases00in00value00to00help00meet00
goals00faster.
It00ensures00money00is00placed00in00a00safe,00risk-
free,00and00easily00accessible00financial00asset.
It00helps00a00person00understand00how00money00was00spent00previously00in00order00to00
reliably00predict00future00expenses.00-00ans--
✔✔It00provides00access00to00potential00revenue00or00increases00in00value00to00help00me
et00goals00faster.

A00sign00company00is00planning00to00have00an00initial00public00offering00(IPO).00In00whic
h00type00of00market00will00its00stock00first00be00sold00to00the00public?
Efficient00market
Secondary00market

, Money00market
Primary00market00-00ans--✔✔Primary00market

Which00type00of00economic00indicator00changes00after00the00economy00changes00and00h
elps00identify00trends00in00the00long00term?
Yield00curve00indicator
Leading00indicator
Coincident00indicator
Lagging00indicator00-00ans--✔✔Lagging00indicator

How00does00an00investment00institution,00such00as00a00mutual00fund,00facilitate00the00cir
culation00of00money00in00the00economy?
By00insuring00deposits00in00investment00accounts00up00to00$250,00000to00promote00publi
c00confidence
By00raising00capital00on00a00contractual00basis,00such00as00an00insurance00contract
By00providing00individuals00and00firms00access00to00financial00markets00to00buy00or00sell
00financial00securities00-00ans--
✔✔By00providing00individuals00and00firms00access00to00financial00markets00to00buy00or00
sell00financial00securities

Which00type00of00economic00indicator00is00used00by00governments00and00policymakers00
to00implement00or00alter00policies00in00an00effort00to00avoid00or00minimize00the00effects00
of00an00economic00downturn?
Correlated00indicator
Coincident00indicator
Lagging00indicator
Leading00indicator00-00ans--✔✔Leading00indicator

What00should00a00potential00bondholder00(lender)00do00to00prevent00a00company00(borro
wer)00from00taking00on00risky00projects?
Set00strict00covenants00that00the00company00cannot00uphold00if00it00chooses00a00risky00p
roject
Encourage00manipulation00of00accounting00procedures00to00optimize00the00company's00
profit
Separate00owners00from00management00so00their00interests00do00not00conflict00-00ans--
✔✔Set00strict00covenants00that00the00company00cannot00uphold00if00it00chooses00a00risk
y00project

Which00factor00contributes00to00the00inflation00of00the00prices00of00goods00and00services0
0over00time?
Increase00in00demand00for00goods00and00services
Decrease00in00costs00of00production
Decrease00in00employee00demand00for00higher00wages00-00ans--
✔✔Increase00in00demand00for00goods00and00services