d076 Lesson checks

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? a) Financial institutions b) Real estate c) Investments d) Business finance - d) Business finance Business finance is the area of finance that deals with uses and sources of funding to increase the value of the firm. What is the primary difference between finance and accounting? a) Accounting involves investing and forecasting, while finance summarizes a company's financial information. b) Accounting focuses on the future, while finance is generally backward-looking. c) Finance focuses on the future, while accounting is generally backward-looking. d) Finance provides financial data to decision makers, and accounting involves making decisions using that data - c) Finance focuses on the future, while accounting is generally backward-looking. Finance is the management and allocation of capital with the objectives of investing, forecasting, budgeting, saving, lending, and borrowing. Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? a) Financial institutions b) Accounting c) Investments d) Capital structure - c) Investments Investments is the area of finance that seeks to create wealth in the future by deciding where to allocate money. What is the primary goal of the financial manager of a firm? a) To maximize owner wealth b) To maximize the manager's utility c) To minimize the asset holdings of the firm d) To minimize the costs of the firm - a) To maximize owner wealth The financial manager should make decisions based on the primary goal of maximizing owner wealth. What should be the main question a firm asks when considering any investment decision? a) Will this investment help the company reduce costs? b) What is the best investment in the stock market? c) Do the benefits of this investment outweigh the costs? d) Will this investment add value to the firm? - c) 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. What is the primary aim of personal finance goals? a) To maximize shareholders' utility by increasing a firm's value b) To create more wealth and returns on investments c) To maximize satisfaction from products purchased and services obtained d) To increase consumption of goods and services - c) To maximize satisfaction from products purchased and services obtained The objective of personal financial goals is to maximize one's utility. Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project? a) Making credit standard decisions b) Making investment decisions c) Making inventory control decisions d) Making financing decisions - d) 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. Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? a) Insurance b) Private equity c) Corporate finance d) Financial planning - b) Private equity 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. Which task does a financial manager perform when assessing the costs and benefits of potential projects? a) Making investment decisions b) Implementing financial policies c) Managing working capital d) Making financing decisions - a) Making investment decisions Understanding how benefits weigh up against costs is the first priority before moving forward with financing and managerial decisions. What tool can you use to understand your overall personal cash flows? a) Setting financial goals b) Investing c) Saving d) Budgeting - d) Budgeting Budgeting helps you to understand your income and expenses and to analyze your cash flows. What is a reasonable alternative to keeping an emergency stash of cash?