WGU D076 FINANCE SKILLS FOR MANAGERS
FULL SOLUTION STUDY GUIDE
◉ Accounts Receivable Turnover (AR Turnover).
Answer: An activity ratio found by credit sales divided by accounts
receivable.
◉ Activity Ratios.
Answer: A category of ratios that measure how well a company uses
its assets to generate sales or cash, showing the firm's operational
efficiency and profitability.
◉ Additional Funds Needed (AFN).
Answer: Another name for the discretionary financing needed or
external financing needed. It represents the additional financing
needed given a firm's expectations for future growth.
◉ Affirmative Covenants.
Answer: A bond covenant that describes things the company pledges
itself to do in order to protect bondholders.
◉ Agency Costs.
,Answer: Costs that are incurred when management does not act in
the best interest of shareholders.
◉ Agency Problem.
Answer: When the agent (the management) does not act in the best
interest of the principal (the owners).
◉ Aggressive Assets.
Answer: Companies or securities with beta greater than 1.
◉ Annual Percentage Rate.
Answer: The annual interest rate that is charged for borrowing
money or that is earned through investment.
◉ Annuity.
Answer: A stream of cash flows of an equal amount paid every
consecutive period.
◉ Annuity Due.
Answer: A series of equal payments made at the beginning of
consecutive periods.
◉ Asset Pricing.
,Answer: The process of valuing assets.
◉ Auction Market.
Answer: A secondary market with a physical location and where
prices are determined by investors' willingness to pay.
◉ Average Collection Period (ACP).
Answer: An activity ratio found by the number of days in a year
(365) divided by AR turnover.
◉ Balance Sheet Forecasting.
Answer: Using sales growth and the profit forecast to construct a pro
forma balance sheet to understand the future implications of the
sources and uses of finances.
◉ Banks and Credit Unions.
Answer: Receive deposits and extend loans to individuals and
businesses.
◉ Benchmarking.
Answer: The process of completing a financial analysis to compare a
firm's financial performance to that of other similar firms.
, ◉ Beta.
Answer: A variable that describes how the price of a security varies
with the market.
◉ Bid-ask Spread.
Answer: The difference between the bid and ask prices that
compensate the specialist for the risk that he or she bears for
willingness to provide liquidity.
◉ Board of Directors.
Answer: A group of people who jointly supervise the activities of an
organization.
◉ Bond Indenture.
Answer: A legal contract that governs the relationship between a
firm and its bondholders.
◉ Bondholders.
Answer: A person who loans a corporation money by buying debt
securities.
◉ Business Finance.
Answer: An area of finance that deals with sources of funding, the
capital structure of corporations, the actions that managers take to
FULL SOLUTION STUDY GUIDE
◉ Accounts Receivable Turnover (AR Turnover).
Answer: An activity ratio found by credit sales divided by accounts
receivable.
◉ Activity Ratios.
Answer: A category of ratios that measure how well a company uses
its assets to generate sales or cash, showing the firm's operational
efficiency and profitability.
◉ Additional Funds Needed (AFN).
Answer: Another name for the discretionary financing needed or
external financing needed. It represents the additional financing
needed given a firm's expectations for future growth.
◉ Affirmative Covenants.
Answer: A bond covenant that describes things the company pledges
itself to do in order to protect bondholders.
◉ Agency Costs.
,Answer: Costs that are incurred when management does not act in
the best interest of shareholders.
◉ Agency Problem.
Answer: When the agent (the management) does not act in the best
interest of the principal (the owners).
◉ Aggressive Assets.
Answer: Companies or securities with beta greater than 1.
◉ Annual Percentage Rate.
Answer: The annual interest rate that is charged for borrowing
money or that is earned through investment.
◉ Annuity.
Answer: A stream of cash flows of an equal amount paid every
consecutive period.
◉ Annuity Due.
Answer: A series of equal payments made at the beginning of
consecutive periods.
◉ Asset Pricing.
,Answer: The process of valuing assets.
◉ Auction Market.
Answer: A secondary market with a physical location and where
prices are determined by investors' willingness to pay.
◉ Average Collection Period (ACP).
Answer: An activity ratio found by the number of days in a year
(365) divided by AR turnover.
◉ Balance Sheet Forecasting.
Answer: Using sales growth and the profit forecast to construct a pro
forma balance sheet to understand the future implications of the
sources and uses of finances.
◉ Banks and Credit Unions.
Answer: Receive deposits and extend loans to individuals and
businesses.
◉ Benchmarking.
Answer: The process of completing a financial analysis to compare a
firm's financial performance to that of other similar firms.
, ◉ Beta.
Answer: A variable that describes how the price of a security varies
with the market.
◉ Bid-ask Spread.
Answer: The difference between the bid and ask prices that
compensate the specialist for the risk that he or she bears for
willingness to provide liquidity.
◉ Board of Directors.
Answer: A group of people who jointly supervise the activities of an
organization.
◉ Bond Indenture.
Answer: A legal contract that governs the relationship between a
firm and its bondholders.
◉ Bondholders.
Answer: A person who loans a corporation money by buying debt
securities.
◉ Business Finance.
Answer: An area of finance that deals with sources of funding, the
capital structure of corporations, the actions that managers take to
