D076 Finance Skills for Managers EXAMS 100%

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? - Business finance What is the primary difference between finance and accounting? - Finance focuses on the future, while accounting is generally backward-looking. Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? - Investments What is the primary goal of the financial manager of a firm? - To maximize owner wealth What should be the main question a firm asks when considering any investment decision? - Do the benefits of this investment outweigh the costs? What is the primary aim of personal finance goals? - To maximize satisfaction from products purchased and services obtained Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project? - Making financing decisions Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? - Private equity Which task does a financial manager perform when assessing the costs and benefits of potential projects? - Making investment decisions What tool can you use to understand your overall personal cash flows? - Budgeting What is a reasonable alternative to keeping an emergency stash of cash? - Investing in a savings account 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? - Financing What area of finance involves deciding which assets to invest in to create wealth in the future? - Investments 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? - Making a financing decision 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? - To maximize individual utility Which professional works with individuals to help them achieve their financial goals? - Financial planner 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? - Financing a goal What are the purposes of financial markets? - To provide liquidity and determine prices In which financial market are securities such as stocks and bonds are traded after their initial issuance? - Secondary market What kind of market primarily allows institutions to borrow and lend in the short term? - Money market 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? - Primary market What is the primary role of financial institutions? - To conduct financial transactions such as investments, loans, and deposits What is a depository institution? - An institution that accepts and pays interest on deposits of money, as well as extends loans Which financial institution ensures that a nation's economy remains healthy by controlling the amount of money circulating in the economy? - Central bank How do insurance companies pay policyholders when a claim is made? - They use returns from stocks and bonds. Which type of financial institution deals mainly with providing for retirement through employers? - Pension fund A large corporation is looking to merge with another large corporation. Which financial institution can help them do this? - Investment bank Unemployment rate is which type of economic indicator? - Lagging The Federal Reserve sometimes adjusts the interest rate at which commercial banks can borrow from it. What is the purpose of adjusting the interest rate? - To regulate inflation and unemployment What would an inverted yield curve signal? - It may indicate an economic downturn. In what way are coincident indicators useful? - They are analyzed during economic shifts to provide information about the current state of the economy. Which responsibility is a focus of the U.S. Securities and Exchange Commission? - To protect investors Which type of financial institution provides individuals and firms access to financial markets? - Investment institutions Which financial institution includes entities that receive money from institutional investors and wealthy individuals to buy troubled companies to improve them and earn returns by selling them or going public? - Private equity Yield curve is which type of economic indicator? - Leading About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note has an interest rate of 2.28%. What does this information indicate about the future economy? - It may indicate an economic downturn. Which term reflects a person's beliefs about right and wrong, good and bad, or just and unjust? - Moral