WGU Business Acumen C201 - ch17 Questions
and Verified Answers
Financial managers Correct Answer: Executives who develop and implement their firm's financial plan
and determine the most appropriate sources and uses of funds. They are among the most vital people on
the corporate payroll.
Risk-return trade-off Correct Answer: Financial managers strive to maximize the wealth of their firm's
shareholders by striking the optimal balance between risk and return.
Financial plan Correct Answer: A document that specifies the funds needed by a firm for a given period
of time, the timing of inflows and outflows, and the most appropriate sources and uses of funds.
Short-term assets Correct Answer: Consists of cash and assets that can be, or are expected to be,
converted into cash within a year. The major current assets are cash, marketable securities, accounts
receivable, and inventory.
Capital investment analysis Correct Answer: Entails long-lived assets that are expected to produce
economic benefits for more than one year.
Managing international assets Correct Answer: Today, firms often have assets worldwide. Managing
international assets creates several challenges for the financial manager, one of the most important of
which is the problem of exchange rates.
Sources of funds Correct Answer: There are two sources of funds: debt and equity. Debt capital consists
of funds obtained through borrowing. Equity capital consists of funds provided by the firm's owners
when they reinvest earnings, make additional contributions, liquidate assets, issue stock to the general
public, or raise capital from outside investors. The mix of a firm's debt and equity capital is known as its
capital structure.
Leverage and capital structure decisions Correct Answer: Raising needed cash by borrowing allows a firm
to benefit from the principle of leverage, which is increasing the rate of return on funds invested by
borrowing funds.
Mixing short-term and long-term funds Correct Answer: Short-term funds consist of current liabilities,
and long-term funds consist of long-term debt and equity. Short-term funds are generally less expensive
than long-term funds, but they also expose the firm to more risk.
Dividend policy Correct Answer: Dividends are periodic cash payments to shareholders. The most
common type of dividend is paid quarterly and is often labeled as a regular dividend. Occasionally, firms
make one-time special or extra dividend payments.
and Verified Answers
Financial managers Correct Answer: Executives who develop and implement their firm's financial plan
and determine the most appropriate sources and uses of funds. They are among the most vital people on
the corporate payroll.
Risk-return trade-off Correct Answer: Financial managers strive to maximize the wealth of their firm's
shareholders by striking the optimal balance between risk and return.
Financial plan Correct Answer: A document that specifies the funds needed by a firm for a given period
of time, the timing of inflows and outflows, and the most appropriate sources and uses of funds.
Short-term assets Correct Answer: Consists of cash and assets that can be, or are expected to be,
converted into cash within a year. The major current assets are cash, marketable securities, accounts
receivable, and inventory.
Capital investment analysis Correct Answer: Entails long-lived assets that are expected to produce
economic benefits for more than one year.
Managing international assets Correct Answer: Today, firms often have assets worldwide. Managing
international assets creates several challenges for the financial manager, one of the most important of
which is the problem of exchange rates.
Sources of funds Correct Answer: There are two sources of funds: debt and equity. Debt capital consists
of funds obtained through borrowing. Equity capital consists of funds provided by the firm's owners
when they reinvest earnings, make additional contributions, liquidate assets, issue stock to the general
public, or raise capital from outside investors. The mix of a firm's debt and equity capital is known as its
capital structure.
Leverage and capital structure decisions Correct Answer: Raising needed cash by borrowing allows a firm
to benefit from the principle of leverage, which is increasing the rate of return on funds invested by
borrowing funds.
Mixing short-term and long-term funds Correct Answer: Short-term funds consist of current liabilities,
and long-term funds consist of long-term debt and equity. Short-term funds are generally less expensive
than long-term funds, but they also expose the firm to more risk.
Dividend policy Correct Answer: Dividends are periodic cash payments to shareholders. The most
common type of dividend is paid quarterly and is often labeled as a regular dividend. Occasionally, firms
make one-time special or extra dividend payments.
