D076 Study Guide Questions With Complete Solutions

In which way is accounting different from finance? Accounting is focused on allocating capital, while finance is focused on bringing in capital. Accounting forecasts future performance, given the past, while finance records past performance. Accounting is about budgeting, saving, and borrowing, while finance is about investing, forecasting, and lending. Accounting is backward looking, while finance is focused on the future. - ANSWER-Accounting is backward looking, while finance is focused on the future. What is the main question that both individuals and companies must consider when making financial decisions to reach a goal? Will this decision require debt or equity financing? Will utility be maximized through this decision? Will this decrease the amount of cash available? Will the benefits of the action outweigh the costs? - ANSWER-Will the benefits of the action outweigh the costs? A financial manager at a company is trying to determine whether to issue new stocks or new bonds to cover the costs of a project the company is doing the next year. Which main task in business finance is this situation an example of? Managing working capital Making investment decisions Managing interdepartmental loans Making financing decisions - ANSWER-Making financing decisions