D076 OA EXAM PREP TEST BANK
VERIFIED QUESTIONS AND CORRECT
ANSWERS
●● What is the main question that both individuals and companies must
consider when making financial decisions to reach a goal?
Will the benefits of the action outweigh the costs?
Will this decision require debt or equity financing?
Will utility be maximized through this decision?
Answer: Will the benefits of the action outweigh the costs?
●● A financial manager at a company is trying to determine whether to
issue new stocks or new bonds to cover the costs of a project the
company is doing the next year.
Which main task in business finance is this situation an example of?
Making financing decisions
Making investment decisions
Managing interdepartmental loans
Answer: Making financing decisions
●● How can investing help a person reach personal financial goals?
It provides access to potential revenue or increases in value to help meet
goals faster.
,It ensures money is placed in a safe, risk-free, and easily accessible
financial asset.
It helps a person understand how money was spent previously in order to
reliably predict future expenses.
Answer: It provides access to potential revenue or increases in value to
help meet goals faster.
●● A sign company is planning to have an initial public offering (IPO).
In which type of market will its stock first be sold to the public?
Efficient market
Secondary market
Money market
Primary market
Answer: Primary market
●● Which type of economic indicator changes after the economy
changes and helps identify trends in the long term?
Yield curve indicator
Leading indicator
Coincident indicator
Lagging indicator
Answer: Lagging indicator
, ●● How does an investment institution, such as a mutual fund, facilitate
the circulation of money in the economy?
By insuring deposits in investment accounts up to $250,000 to promote
public confidence
By raising capital on a contractual basis, such as an insurance contract
By providing individuals and firms access to financial markets to buy or
sell financial securities
Answer: By providing individuals and firms access to financial markets
to buy or sell financial securities
●● 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?
Correlated indicator
Coincident indicator
Lagging indicator
Leading indicator
Answer: Leading indicator
●● What should a potential bondholder (lender) do to prevent a
company (borrower) from taking on risky projects?
Set strict covenants that the company cannot uphold if it chooses a risky
project
VERIFIED QUESTIONS AND CORRECT
ANSWERS
●● What is the main question that both individuals and companies must
consider when making financial decisions to reach a goal?
Will the benefits of the action outweigh the costs?
Will this decision require debt or equity financing?
Will utility be maximized through this decision?
Answer: Will the benefits of the action outweigh the costs?
●● A financial manager at a company is trying to determine whether to
issue new stocks or new bonds to cover the costs of a project the
company is doing the next year.
Which main task in business finance is this situation an example of?
Making financing decisions
Making investment decisions
Managing interdepartmental loans
Answer: Making financing decisions
●● How can investing help a person reach personal financial goals?
It provides access to potential revenue or increases in value to help meet
goals faster.
,It ensures money is placed in a safe, risk-free, and easily accessible
financial asset.
It helps a person understand how money was spent previously in order to
reliably predict future expenses.
Answer: It provides access to potential revenue or increases in value to
help meet goals faster.
●● A sign company is planning to have an initial public offering (IPO).
In which type of market will its stock first be sold to the public?
Efficient market
Secondary market
Money market
Primary market
Answer: Primary market
●● Which type of economic indicator changes after the economy
changes and helps identify trends in the long term?
Yield curve indicator
Leading indicator
Coincident indicator
Lagging indicator
Answer: Lagging indicator
, ●● How does an investment institution, such as a mutual fund, facilitate
the circulation of money in the economy?
By insuring deposits in investment accounts up to $250,000 to promote
public confidence
By raising capital on a contractual basis, such as an insurance contract
By providing individuals and firms access to financial markets to buy or
sell financial securities
Answer: By providing individuals and firms access to financial markets
to buy or sell financial securities
●● 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?
Correlated indicator
Coincident indicator
Lagging indicator
Leading indicator
Answer: Leading indicator
●● What should a potential bondholder (lender) do to prevent a
company (borrower) from taking on risky projects?
Set strict covenants that the company cannot uphold if it chooses a risky
project
