WGU D076 FINANCE SKILLS FOR MANAGERS UPDATED
QUESTIONS AND CORRECT ANSWERS
Question:
1. What is a reasonable alternative to keeping an emergency stash of cash?
Answer:
Investing in a savings account Investing in a readily withdrawable account that still earns some interest is a
value-preserving alternative.
Question:
2. Which area of finance deals with sources of funding and the capital structure of corporations and seeks
to increase the value of a firm to its owners?
Answer:
Business finance is the area of finance that deals with uses and sources of funding to increase the value of
the firm.
Question:
3. What is the primary difference between finance and accounting?
Answer:
Finance focuses on the future, while accounting is generally backward-looking.
Question:
4. Which subspecialty of finance primarily involves deciding which assets will create more wealth and
earn positive returns?
Answer:
Investments is the area of finance that seeks to create wealth in the future by deciding where to allocate
money.
Question:
5. What is the primary goal of the financial manager of a firm?
Answer:
To maximize owner wealth. The financial manager should make decisions based on the primary goal of
maximizing owner wealth.
Question:
6. What should be the main question a firm asks when considering any investment decision?
Answer:
Do the benefits of this investment outweigh the costs? For any investment, you should expect to receive a
benefit worth at least as much as the initial cost.
Question:
7. What is the primary aim of personal finance goals?
Answer:
To maximize satisfaction from products purchased and services obtained. The objective of personal
financial goals is to maximize one's utility.
,Question:
8. Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of
equipment for a new project?
Answer:
Making financing decisions. The manager is deciding where to get the funds to support a new project,
which means the manager is making a financing decision.
Question:
9. Which financial career focuses on investing capital into firms whose shares are not currently sold on any
public stock exchange?
Answer:
Private equity deals with investments in firms that are privately held and whose ownership is not yet
bought or sold on any public stock exchange.
Question:
10. Which task does a financial manager perform when assessing the costs and benefits of potential
projects?
Answer:
Making investment decisions Managing working capital means overseeing day-to-day operations and cash
flows.
Question:
11. What tool can you use to understand your overall personal cash flows?
Answer:
Budgeting helps you to understand your income and expenses and to analyze your cash flows.
Question:
12. You want to buy a house, so you obtain a mortgage for which you can afford the monthly payments.
What process have you engaged in as part of your financial decision-making?
Answer:
Financing Part of the personal finance process is figuring out how to finance your goals in a way that is
within your means
Question:
13. What area of finance involves deciding which assets to invest in to create wealth in the future?
Answer:
Investments Investments are an area of finance that involves deciding which assets to invest in to create
wealth in the future.
Question:
14. Hannah is the financial manager of a firm. A project that she has recommended has been approved and
will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out
how to raise enough money to start the project. She can choose whether to issue new bonds, new stocks, a
mortgage loan, or some combination of those options. What task is Hannah performing in this scenario?
Answer:
Making a financing decision Since the project has already been approved, Hannah is trying to find a way to
finance the investment and considering its capital structure.
, Question:
15. Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to
reach their goal of taking their children to visit their grandparents in Spain next summer. What is the
objective of setting such a goal?
Answer:
To maximize individual utility While everyone has different personal financial goals, the objectives of
such goals is to maximize individual utility
Question:
16. Which professional works with individuals to help them achieve their financial goals?
Answer:
Financial planner Professional financial planners work with individuals to help them achieve their
financial goals.
Question:
17. Omar is about to purchase a new car for $30,000. He knows he wants to buy the car, but he is still
trying to decide how to pay for it. He has barely over $30,000 in his bank account. He can either take out
an auto loan from a bank or use a mix of cash and an auto loan. In this scenario, what is Omar doing?
Answer:
Financing a goal He has already made a decision to purchase the car and is now deciding on financing
options.
Question:
18. What are the purposes of financial markets?
Answer:
The purposes of financial markets are to provide liquidity and to determine prices.
Question:
19. In which financial market are securities such as stocks and bonds are traded after their initial issuance?
Answer:
Secondary market Financial securities are first sold in the primary financial market and then traded among
investors in the secondary financial market.
Question:
20. What kind of market primarily allows institutions to borrow and lend in the short term?
Answer:
Money market Assets in money markets are typically highly liquid and intended for use within a year or
less.
Question:
21. A local start-up company just hit its five-year anniversary and is planning an initial public offering
sometime this year. In order to issue public stock, which market will the company use?
Answer:
Primary market When a company issues stock for the first time to raise capital, shares must initially be
sold through a primary market.
QUESTIONS AND CORRECT ANSWERS
Question:
1. What is a reasonable alternative to keeping an emergency stash of cash?
Answer:
Investing in a savings account Investing in a readily withdrawable account that still earns some interest is a
value-preserving alternative.
Question:
2. Which area of finance deals with sources of funding and the capital structure of corporations and seeks
to increase the value of a firm to its owners?
Answer:
Business finance is the area of finance that deals with uses and sources of funding to increase the value of
the firm.
Question:
3. What is the primary difference between finance and accounting?
Answer:
Finance focuses on the future, while accounting is generally backward-looking.
Question:
4. Which subspecialty of finance primarily involves deciding which assets will create more wealth and
earn positive returns?
Answer:
Investments is the area of finance that seeks to create wealth in the future by deciding where to allocate
money.
Question:
5. What is the primary goal of the financial manager of a firm?
Answer:
To maximize owner wealth. The financial manager should make decisions based on the primary goal of
maximizing owner wealth.
Question:
6. What should be the main question a firm asks when considering any investment decision?
Answer:
Do the benefits of this investment outweigh the costs? For any investment, you should expect to receive a
benefit worth at least as much as the initial cost.
Question:
7. What is the primary aim of personal finance goals?
Answer:
To maximize satisfaction from products purchased and services obtained. The objective of personal
financial goals is to maximize one's utility.
,Question:
8. Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of
equipment for a new project?
Answer:
Making financing decisions. The manager is deciding where to get the funds to support a new project,
which means the manager is making a financing decision.
Question:
9. Which financial career focuses on investing capital into firms whose shares are not currently sold on any
public stock exchange?
Answer:
Private equity deals with investments in firms that are privately held and whose ownership is not yet
bought or sold on any public stock exchange.
Question:
10. Which task does a financial manager perform when assessing the costs and benefits of potential
projects?
Answer:
Making investment decisions Managing working capital means overseeing day-to-day operations and cash
flows.
Question:
11. What tool can you use to understand your overall personal cash flows?
Answer:
Budgeting helps you to understand your income and expenses and to analyze your cash flows.
Question:
12. You want to buy a house, so you obtain a mortgage for which you can afford the monthly payments.
What process have you engaged in as part of your financial decision-making?
Answer:
Financing Part of the personal finance process is figuring out how to finance your goals in a way that is
within your means
Question:
13. What area of finance involves deciding which assets to invest in to create wealth in the future?
Answer:
Investments Investments are an area of finance that involves deciding which assets to invest in to create
wealth in the future.
Question:
14. Hannah is the financial manager of a firm. A project that she has recommended has been approved and
will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out
how to raise enough money to start the project. She can choose whether to issue new bonds, new stocks, a
mortgage loan, or some combination of those options. What task is Hannah performing in this scenario?
Answer:
Making a financing decision Since the project has already been approved, Hannah is trying to find a way to
finance the investment and considering its capital structure.
, Question:
15. Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to
reach their goal of taking their children to visit their grandparents in Spain next summer. What is the
objective of setting such a goal?
Answer:
To maximize individual utility While everyone has different personal financial goals, the objectives of
such goals is to maximize individual utility
Question:
16. Which professional works with individuals to help them achieve their financial goals?
Answer:
Financial planner Professional financial planners work with individuals to help them achieve their
financial goals.
Question:
17. Omar is about to purchase a new car for $30,000. He knows he wants to buy the car, but he is still
trying to decide how to pay for it. He has barely over $30,000 in his bank account. He can either take out
an auto loan from a bank or use a mix of cash and an auto loan. In this scenario, what is Omar doing?
Answer:
Financing a goal He has already made a decision to purchase the car and is now deciding on financing
options.
Question:
18. What are the purposes of financial markets?
Answer:
The purposes of financial markets are to provide liquidity and to determine prices.
Question:
19. In which financial market are securities such as stocks and bonds are traded after their initial issuance?
Answer:
Secondary market Financial securities are first sold in the primary financial market and then traded among
investors in the secondary financial market.
Question:
20. What kind of market primarily allows institutions to borrow and lend in the short term?
Answer:
Money market Assets in money markets are typically highly liquid and intended for use within a year or
less.
Question:
21. A local start-up company just hit its five-year anniversary and is planning an initial public offering
sometime this year. In order to issue public stock, which market will the company use?
Answer:
Primary market When a company issues stock for the first time to raise capital, shares must initially be
sold through a primary market.
