WGU D775- Introduction to Business Finance (Notes from
the book only) UPDATED ACTUAL Questions and CORRECT
Answers
)
What are the three types of finances? 1) Personal
2) Public
3) Business
Describe personal finance. Focus: Managing individual or household financial activities
Scope: Budgeting, saving, investing, retirement planning
Objective: Meet financial goals and handle unforeseen expenses
Key activities: Budgeting, debt management, investing, acquiring insurance
Primary stakeholders: Individuals, households
Financial tools: Savings accounts, retirement accounts, personal loans,
investments
Challenges: Debt management, achievement of financial goals, inflation
Decision Making: Based on personal financial goals and risk tolerance
Time Orientation: Short-term and long-term planning
Regulations: Influenced by tax laws and credit regulations
,Describe Public Finance. Focus: Managing a government's revenues, expenditures, and debt
Scope: Tax collection, government spending, public debt issuance
Objective: Allocate resources efficiently and promote economic stability
Key activities: Budgeting, taxation, public expenditure, debt management
Primary Stakeholders: Government, taxpayers, public institutions
Financial tools: Tax policies, government bonds, budget reports
Challenges: Budget balancing, economic stability, public debt
Decision Making: Influenced by economic policy, public needs, and political
factors
Time Orientation: Long-term economic stability and growth
Regulations: Governed by fiscal policies, regulations, and public interest
Describe Business Finance. Focus: Managing a company's financial activities and strategies
Scope: Capital investment decisions, financing methods, risk management
Objective: Maximize shareholder value and ensure efficient resource use
Key activities: Financial planning, capital raising, risk management, creating
dividend policies
Primary Stakeholders: Shareholders, management, creditors, investors
Financial tools: Corporate bonds, stocks, loans, financial statements
Challenges: Funding, financial risk, market competition
Decision Making: Driven by profitability, strategic goals, market conditions
Time Orientation: Short-term operational needs and long-term strategic goals
Regulations: Subject to corporate governance, financial regulations, and market
conditions
What are the areas of business finance aka corporate 1. Financial measures are used to help management make decisions (ratio analysis)
finance?
2. Financial analyst use mathematical models to select what projects to invest in
(capital budgeting)
3. Financial analyst use the cost of capital to determine whether these projects
should be financed with either debt or equity and which type of each.
, What are the three roles for business finance? 1. Using financial ratios to manage the business
2. Applying skills with time value of money to determine which projects to invest in
3. Controlling the risk associated with projects by computing the cost of capital to
determine how to fund the chosen projects
What are the debt and equity instruments? 1) Stocks
2) Bonds
3) Financial derivatives
Define Stocks: Certificates that represent ownership of an asset
What are common stocks? -They are recorded under owner equity on the balance sheet and is very liquid in
publicly traded firms
- primary owners of a company and have voting rights
- allowing them to influence major corporate decisions
- such as electing the board of directors and approving mergers
Benefit from: potential capital appreciation and dividends
- last in line when it comes to claims on assets in the event of liquidation, sitting
behind secured creditors, bondholders, and preferred stockholders.
- Some firms pay dividends to common shareholders, but they typically cannot be
paid until the preferred dividends are paid in full.
- Example: If an investor purchases a share of stock for $10 and a year later sells it
for $12, the capital appreciation is $2 ($12 - $10) or 20 percent ([$12 - $10]/10)
Describe Market Capitalization. - They are the total market value of a company's outstanding shares.
-If you take the number of common shares of stock and multiply it by the price
per share
Describe Dividends The companys earnings distributed to shareholders, usually in the form of cash or
additional stock
Describe Capital appreciation: - Stock bought at a lower price than what it is sold.
Equation: Lower purchase price - higher sales price
the book only) UPDATED ACTUAL Questions and CORRECT
Answers
)
What are the three types of finances? 1) Personal
2) Public
3) Business
Describe personal finance. Focus: Managing individual or household financial activities
Scope: Budgeting, saving, investing, retirement planning
Objective: Meet financial goals and handle unforeseen expenses
Key activities: Budgeting, debt management, investing, acquiring insurance
Primary stakeholders: Individuals, households
Financial tools: Savings accounts, retirement accounts, personal loans,
investments
Challenges: Debt management, achievement of financial goals, inflation
Decision Making: Based on personal financial goals and risk tolerance
Time Orientation: Short-term and long-term planning
Regulations: Influenced by tax laws and credit regulations
,Describe Public Finance. Focus: Managing a government's revenues, expenditures, and debt
Scope: Tax collection, government spending, public debt issuance
Objective: Allocate resources efficiently and promote economic stability
Key activities: Budgeting, taxation, public expenditure, debt management
Primary Stakeholders: Government, taxpayers, public institutions
Financial tools: Tax policies, government bonds, budget reports
Challenges: Budget balancing, economic stability, public debt
Decision Making: Influenced by economic policy, public needs, and political
factors
Time Orientation: Long-term economic stability and growth
Regulations: Governed by fiscal policies, regulations, and public interest
Describe Business Finance. Focus: Managing a company's financial activities and strategies
Scope: Capital investment decisions, financing methods, risk management
Objective: Maximize shareholder value and ensure efficient resource use
Key activities: Financial planning, capital raising, risk management, creating
dividend policies
Primary Stakeholders: Shareholders, management, creditors, investors
Financial tools: Corporate bonds, stocks, loans, financial statements
Challenges: Funding, financial risk, market competition
Decision Making: Driven by profitability, strategic goals, market conditions
Time Orientation: Short-term operational needs and long-term strategic goals
Regulations: Subject to corporate governance, financial regulations, and market
conditions
What are the areas of business finance aka corporate 1. Financial measures are used to help management make decisions (ratio analysis)
finance?
2. Financial analyst use mathematical models to select what projects to invest in
(capital budgeting)
3. Financial analyst use the cost of capital to determine whether these projects
should be financed with either debt or equity and which type of each.
, What are the three roles for business finance? 1. Using financial ratios to manage the business
2. Applying skills with time value of money to determine which projects to invest in
3. Controlling the risk associated with projects by computing the cost of capital to
determine how to fund the chosen projects
What are the debt and equity instruments? 1) Stocks
2) Bonds
3) Financial derivatives
Define Stocks: Certificates that represent ownership of an asset
What are common stocks? -They are recorded under owner equity on the balance sheet and is very liquid in
publicly traded firms
- primary owners of a company and have voting rights
- allowing them to influence major corporate decisions
- such as electing the board of directors and approving mergers
Benefit from: potential capital appreciation and dividends
- last in line when it comes to claims on assets in the event of liquidation, sitting
behind secured creditors, bondholders, and preferred stockholders.
- Some firms pay dividends to common shareholders, but they typically cannot be
paid until the preferred dividends are paid in full.
- Example: If an investor purchases a share of stock for $10 and a year later sells it
for $12, the capital appreciation is $2 ($12 - $10) or 20 percent ([$12 - $10]/10)
Describe Market Capitalization. - They are the total market value of a company's outstanding shares.
-If you take the number of common shares of stock and multiply it by the price
per share
Describe Dividends The companys earnings distributed to shareholders, usually in the form of cash or
additional stock
Describe Capital appreciation: - Stock bought at a lower price than what it is sold.
Equation: Lower purchase price - higher sales price
