Intro to Business Finance (D775 WGU) UPDATED ACTUAL
Questions and CORRECT Answers
Accounting Records, reports, and analyzes past financial transactions.
Produces balance sheets, income statements, cash flow statements, etc.
Primarily historic data
, Finance Manages assets and liabilities, plans for growth, manages risks, raises capital, and
budgets
Use data to make strategic, future-oriented decisions
Finance vs. Accouting Accounting provides accurare, historical data; finance uses that data for strategic
future planning
Personal Finance Individual/household finances (budgeting, saving, investing, retirement)
Public Finance Government financial management (tax collection, spending, debt issuance)
Business Finance Manages a company's financial activities (capital investment, financing, risk
management)
3 Roles of Business Finance 1. Use financial ratios to manage the business
2. Apply time value of money to determine investment-worthy projects
Control risk by computing cost of capital, to choose funding methods
Purpose of Financial Statements Provide a snapshot of company performance and efficiency
Balance Sheet Shows financial position at a specific point in time
(Assets = Liabilities + Shareholders' Equity)
Assets All resources with economic value (cash, receivables, inventory, property,
equipment)
Liabilities What a company owes
- Current liabilites = due within 1 year (electric bill)
- long-term liabilities = due after one year (mortgage)
Shareholders' Equity Owners claim after liabilities are paid (i.e. retained earnings)
Income Statement Measures performance over a period
Revenue Income from normal operations
4 Types of Expenses 1. COGS (direct production costs)
2. SG&A (selling, general, and administrative expenses)
3. R&D (research and development)
4. Depreciation (non-cash expense reducing asset value)
Net Income Final profit after all costs, interest, and taxes
Debt Financing Take out a loan or sell bonds to finance a project (interest is paid before taxes).
Raises funds without ownership dilution but adds repayment obligation
Equity Financing Selling ownership shares (company stocks) to finance projects
Raises funds without debt but dilutes ownership
Stocks Certificates representing ownership in a company
Questions and CORRECT Answers
Accounting Records, reports, and analyzes past financial transactions.
Produces balance sheets, income statements, cash flow statements, etc.
Primarily historic data
, Finance Manages assets and liabilities, plans for growth, manages risks, raises capital, and
budgets
Use data to make strategic, future-oriented decisions
Finance vs. Accouting Accounting provides accurare, historical data; finance uses that data for strategic
future planning
Personal Finance Individual/household finances (budgeting, saving, investing, retirement)
Public Finance Government financial management (tax collection, spending, debt issuance)
Business Finance Manages a company's financial activities (capital investment, financing, risk
management)
3 Roles of Business Finance 1. Use financial ratios to manage the business
2. Apply time value of money to determine investment-worthy projects
Control risk by computing cost of capital, to choose funding methods
Purpose of Financial Statements Provide a snapshot of company performance and efficiency
Balance Sheet Shows financial position at a specific point in time
(Assets = Liabilities + Shareholders' Equity)
Assets All resources with economic value (cash, receivables, inventory, property,
equipment)
Liabilities What a company owes
- Current liabilites = due within 1 year (electric bill)
- long-term liabilities = due after one year (mortgage)
Shareholders' Equity Owners claim after liabilities are paid (i.e. retained earnings)
Income Statement Measures performance over a period
Revenue Income from normal operations
4 Types of Expenses 1. COGS (direct production costs)
2. SG&A (selling, general, and administrative expenses)
3. R&D (research and development)
4. Depreciation (non-cash expense reducing asset value)
Net Income Final profit after all costs, interest, and taxes
Debt Financing Take out a loan or sell bonds to finance a project (interest is paid before taxes).
Raises funds without ownership dilution but adds repayment obligation
Equity Financing Selling ownership shares (company stocks) to finance projects
Raises funds without debt but dilutes ownership
Stocks Certificates representing ownership in a company
