D076 Unit 2 Practice Questions

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 -Real estate -Investments -Financial institutions - A What is the primary difference between finance and accounting? -Accounting involves investing and forecasting, while finance summarizes a company's financial information. -Finance provides financial data to decision makers, and accounting involves making decisions using that data. -Finance focuses on the future, while accounting is generally backward-looking. -Accounting focuses on the future, while finance is generally backward-looking. - A Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? -Capital structure -Investments -Accounting -Financial institutions - B What is the primary goal of the financial manager of a firm? -To maximize the manager's utility -To minimize the asset holdings of the firm -To maximize owner wealth -To minimize the costs of the firm - C What should be the main question a firm asks when considering any investment decision? -What is the best investment in the stock market? -Do the benefits of this investment outweigh the costs? -Will this investment add value to the firm? -Will this investment help the company reduce costs? - B What is the primary aim of personal finance goals? -To maximize satisfaction from products purchased and services obtained -To create more wealth and returns on investments -To increase consumption of goods and services -To maximize shareholders' utility by increasing a firm's value - A 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 inventory control decisions -Making financing decisions -Making investment decisions - C Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? -Insurance -Financial planning -Corporate finance -Private equity - D Which task does a financial manager perform when assessing the costs and benefits of potential projects? -Managing working capital -Implementing financial policies -Making financing decisions -Making investment decisions - D What tool can you use to understand your overall personal cash flows? -Budgeting -Investing -Setting financial goals -Saving - A What is a reasonable alternative to keeping an emergency stash of cash? -Investing in long-term bonds -Investing the money in a nicer car -Investing in a savings account -Investing in high-risk growth stocks - C 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 -Assessing -Investing