D775 D775 - ASSESSMENT STUDY GUIDE PART 2 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

D775 D775 - ASSESSMENT STUDY GUIDE PART 2 UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS

Question:
1. What is the time orientation of financial decision-making in business finance?
Answer:
Future projections and planning

Question:
2. What are corporate bonds used for?
Answer:
Financing operations and expansions

Question:
3. What are financial derivatives based on?
Answer:
Performance of underlying assets, indexes, or rates

Question:
4. What is a future as a type of financial derivative?
Answer:
A standardized contract to buy or sell an asset at a specified future date and price

Question:
5. What do speculative bonds, or junk bonds, typically offer compared to investment-grade bonds?
Answer:
Lower risk and lower returns

Question:
6. Which market is an example of a dealer market?
Answer:
National Association of Securities Dealers Automated Quotations (NASDAQ)

Question:
7. What is the primary focus of the Commodity Futures Trading Commission (CFTC)?
Answer:
Overseeing futures and options markets

Question:
8. What does legal compliance ensure in finance?
Answer:
It ensures adherence to laws and regulations.

Question:
9. What is corporate social responsibility (CSR)?

, Answer:
The obligation to contribute positively to society

Question:
10. What do market ratios evaluate?
Answer:
Stock performance

Question:
11. What does a low quick ratio indicate about a company's liquidity?
Answer:
Reliance on inventory

Question:
12. What is the focus of the times interest earned (TIE) ratio?
Answer:
Earnings covering debt payments

Question:
13. Which ratio might the company look at when evaluating its efficacy of the cost-cutting program?
Answer:
Profit margin

Question:
14. Which condition would cause a company to have a low average collection period?
Answer:
Efficient credit policies

Question:
15. Why might the quick ratio be preferred over the current ratio?
Answer:
The quick ratio is a more stringent liquidity test.

Question:
16. A financial analyst working in the headquarters of a large national restaurant chain notices that
operating margins have decreased in one region of the country. What should the analyst look for in the
impacted locations?
Answer:
Increases in food costs

Question:
17. A paint manufacturer recently purchased new computerized blending equipment for its US
manufacturing operations. The new blending machine has 4 times the capacity of the older machines it is
replacing but costs about the same to purchase and operate. Which ratio will the manufacture expect to
increase?
Answer:
Fixed asset turnover ratio