WGU D076 Finance Skills For Managers Objective
Assessment (OA) Final Includes Accurate And Verified
Questions Covering Fundamental Financial Concepts
Such As Time Value Of Money, Financial Statement
Analysis, Budgeting, Risk And Return, Capital Budget
Accounting
The system of recording, reporting, and summarizing past financial
information and transactions.
Accounts Receivable Turnover (AR Turnover)
An activity ratio found by credit sales divided by accounts receivable.
Activity Ratios
A category of ratios that measure how well a company uses its assets to
generate sales or cash, showing the firm's operational efficiency and
profitability.
Additional Funds Needed (AFN)
Another name for the discretionary financing needed or external
financing needed. It represents the additional financing needed given a
firm's expectations for future growth.
Affirmative Covenants
A bond covenant that describes things the company pledges itself to do
in order to protect bondholders.
,Agency Costs
Costs that are incurred when management does not act in the best
interest of shareholders.
Will the benefits of the action outweigh the costs?
What is the main question that both individuals and companies must
consider when making financial decisions to reach a goal?
It provides access to potential revenue or increases in value to help
meet goals faster.
How can investing help a person reach personal financial goals?
Lagging indicator
Which type of economic indicator changes after the economy changes
and helps identify trends in the long term?
By providing individuals and firms access to financial markets to buy
or sell financial securities
How does an investment institution, such as a mutual fund, facilitate
the circulation of money in the economy?
Leading indicator
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?
The present value of the benefits of the investment outweigh the
present value of the costs of the investment.
Which condition indicates that an investment will add value to a
company?
,-The positive cash inflows of the project are greater than the negative
cash outflows of the project.
-The future value of the benefits of the investment outweigh the future
value of the costs of the investment.
-The present value of the benefits of the investment outweigh the
present value of the costs of the investment.
-The opportunity costs of the project outweigh the present value of
current operations of the company.
The project would earn exactly the rate of return required by the firm.
What would an analyst predict for a potential investment with an NPV
of zero?
Because cash flows for a project may be uncertain
Why is it important to consider the cost of capital in an ideal evaluation
method of capital investment?
Opportunity cost
What must be determined in order to compare the values of two
projects with differently timed cash flows that does not need to be
determined for projects with similarly timed cash flows?
For the purposes of analysis, sunk costs are irrelevant.
How do you factor sunk costs into capital investment analysis?
It considers the time value of money, it tells you the dollar value that
the investment will add to the firm, and it takes risk into account.
Why is NPV the most reliable method for evaluating investments?
The project has the internal rate of return equal to the cost of capital.
, You are considering a project that has a profitability index of 1. What
does this mean?
For a preferred stock, a fixed amount is paid forever to compensate
the investors.
Why is it appropriate to calculate the value of a preferred stock in the
same way that you would find the present value of a perpetuity?
Because the value of a cash flow today is different from the value of a
cash flow of the same dollar amount in 10 years
Why is it important to consider the time value of money in an ideal
evaluation method for capital investment?
Management can analyze the different inherent risks that change the
cost of capital to the firm.
How does management choose between two projects that are
seemingly the same?
An inaccurate required rate estimate could cause a firm to reject good
projects or accept bad projects.
Why is it important to have an accurate, carefully calculated required
rate of return as part of the NPV?
It will increase. There is an inverse relationship between YTM and the
price of a bond.
The YTM of a bond went from 8% to 7%. What can be predicted about
the price of the bond?
Contractual
What type of financial institution is an insurance company?
Assessment (OA) Final Includes Accurate And Verified
Questions Covering Fundamental Financial Concepts
Such As Time Value Of Money, Financial Statement
Analysis, Budgeting, Risk And Return, Capital Budget
Accounting
The system of recording, reporting, and summarizing past financial
information and transactions.
Accounts Receivable Turnover (AR Turnover)
An activity ratio found by credit sales divided by accounts receivable.
Activity Ratios
A category of ratios that measure how well a company uses its assets to
generate sales or cash, showing the firm's operational efficiency and
profitability.
Additional Funds Needed (AFN)
Another name for the discretionary financing needed or external
financing needed. It represents the additional financing needed given a
firm's expectations for future growth.
Affirmative Covenants
A bond covenant that describes things the company pledges itself to do
in order to protect bondholders.
,Agency Costs
Costs that are incurred when management does not act in the best
interest of shareholders.
Will the benefits of the action outweigh the costs?
What is the main question that both individuals and companies must
consider when making financial decisions to reach a goal?
It provides access to potential revenue or increases in value to help
meet goals faster.
How can investing help a person reach personal financial goals?
Lagging indicator
Which type of economic indicator changes after the economy changes
and helps identify trends in the long term?
By providing individuals and firms access to financial markets to buy
or sell financial securities
How does an investment institution, such as a mutual fund, facilitate
the circulation of money in the economy?
Leading indicator
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?
The present value of the benefits of the investment outweigh the
present value of the costs of the investment.
Which condition indicates that an investment will add value to a
company?
,-The positive cash inflows of the project are greater than the negative
cash outflows of the project.
-The future value of the benefits of the investment outweigh the future
value of the costs of the investment.
-The present value of the benefits of the investment outweigh the
present value of the costs of the investment.
-The opportunity costs of the project outweigh the present value of
current operations of the company.
The project would earn exactly the rate of return required by the firm.
What would an analyst predict for a potential investment with an NPV
of zero?
Because cash flows for a project may be uncertain
Why is it important to consider the cost of capital in an ideal evaluation
method of capital investment?
Opportunity cost
What must be determined in order to compare the values of two
projects with differently timed cash flows that does not need to be
determined for projects with similarly timed cash flows?
For the purposes of analysis, sunk costs are irrelevant.
How do you factor sunk costs into capital investment analysis?
It considers the time value of money, it tells you the dollar value that
the investment will add to the firm, and it takes risk into account.
Why is NPV the most reliable method for evaluating investments?
The project has the internal rate of return equal to the cost of capital.
, You are considering a project that has a profitability index of 1. What
does this mean?
For a preferred stock, a fixed amount is paid forever to compensate
the investors.
Why is it appropriate to calculate the value of a preferred stock in the
same way that you would find the present value of a perpetuity?
Because the value of a cash flow today is different from the value of a
cash flow of the same dollar amount in 10 years
Why is it important to consider the time value of money in an ideal
evaluation method for capital investment?
Management can analyze the different inherent risks that change the
cost of capital to the firm.
How does management choose between two projects that are
seemingly the same?
An inaccurate required rate estimate could cause a firm to reject good
projects or accept bad projects.
Why is it important to have an accurate, carefully calculated required
rate of return as part of the NPV?
It will increase. There is an inverse relationship between YTM and the
price of a bond.
The YTM of a bond went from 8% to 7%. What can be predicted about
the price of the bond?
Contractual
What type of financial institution is an insurance company?
