D076 FINANCE SKILLS FOR MANAGERS WGU UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Real Return
Answer:
Rate of growth in purchasing power of goods and services
Question:
2. Holding Period Return
Answer:
Return over the entire period that an investor owns a financial security
Question:
3. Beta
Answer:
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a
whole.
Question:
4. standard deviation
Answer:
Used to measure the total risk of securities
Question:
5. annuity due
Answer:
an annuity whose payments occur at the beginning of each period, consecutively
Question:
6. Par Bond
Answer:
When the bond's coupon rate equals the market yield; Bonds are typically issued near par value
Question:
7. Pi
Answer:
Profitability index. At 1, the PI means a internal return rate equal to the cost of capital
Question:
8. Irr
Answer:
Internal rate of return (IRR) is a discount rate at which the net present value (NPV) of an investment is
equal to zero. If the IRR is higher than the cost of borrowing to fund the investment, the investment should
be profitable. Always shown as percentage.
, Question:
9. Net Present Value (NPV)
Answer:
A method of ranking investment proposals using the NPV, which is equal to the present value of the
project's free cash flows discounted at the cost of capital. Shown as dollar amount.. At $0 it means it will
neither add nor subtract value.
Question:
10. Inventory Turnover
Answer:
An activity ratio found by COGS divided by inventory
Question:
11. dividends in arrears
Answer:
Feature of preferred stock specifying that if a company ignores preferred stock dividends it cannot pay
anything to it's common stockholders
Question:
12. Agency Problem
Answer:
the possibility of conflict of interest between the owners and management of a firm
Resolved by aligning interests, example giving shares to manangement
Question:
13. Operating Margin
Answer:
A profitability ratio found by EBIT profit divided by sales
Question:
14. Capital Structure
Answer:
the mixture of debt and equity maintained by a firm
Question:
15. Defensive Assets
Answer:
Companies or securities with betas less than 1.
Question:
16. Variable Expenditure
Answer:
an expense that you have direct control over and that can change from period to period
Question:
17. Price Risk
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Real Return
Answer:
Rate of growth in purchasing power of goods and services
Question:
2. Holding Period Return
Answer:
Return over the entire period that an investor owns a financial security
Question:
3. Beta
Answer:
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a
whole.
Question:
4. standard deviation
Answer:
Used to measure the total risk of securities
Question:
5. annuity due
Answer:
an annuity whose payments occur at the beginning of each period, consecutively
Question:
6. Par Bond
Answer:
When the bond's coupon rate equals the market yield; Bonds are typically issued near par value
Question:
7. Pi
Answer:
Profitability index. At 1, the PI means a internal return rate equal to the cost of capital
Question:
8. Irr
Answer:
Internal rate of return (IRR) is a discount rate at which the net present value (NPV) of an investment is
equal to zero. If the IRR is higher than the cost of borrowing to fund the investment, the investment should
be profitable. Always shown as percentage.
, Question:
9. Net Present Value (NPV)
Answer:
A method of ranking investment proposals using the NPV, which is equal to the present value of the
project's free cash flows discounted at the cost of capital. Shown as dollar amount.. At $0 it means it will
neither add nor subtract value.
Question:
10. Inventory Turnover
Answer:
An activity ratio found by COGS divided by inventory
Question:
11. dividends in arrears
Answer:
Feature of preferred stock specifying that if a company ignores preferred stock dividends it cannot pay
anything to it's common stockholders
Question:
12. Agency Problem
Answer:
the possibility of conflict of interest between the owners and management of a firm
Resolved by aligning interests, example giving shares to manangement
Question:
13. Operating Margin
Answer:
A profitability ratio found by EBIT profit divided by sales
Question:
14. Capital Structure
Answer:
the mixture of debt and equity maintained by a firm
Question:
15. Defensive Assets
Answer:
Companies or securities with betas less than 1.
Question:
16. Variable Expenditure
Answer:
an expense that you have direct control over and that can change from period to period
Question:
17. Price Risk
