D076 TEST + QUIZZES
Which00area00of00finance00deals00with00sources00of00funding00and00the00capital00structur
e00of00corporations00and00seeks00to00increase00the00value00of00a00firm00to00its00owners?
Financial00institutions
Business00finance
Investments
Real00estate00-00ans--
✔✔Business00finance00is00the00area00of00finance00that00deals00with00uses00and00source
s00of00funding00to00increase00the00value00of00the00firm.
What00are00the00main00services00offered00by00financial00institutions?00-00ans--
✔✔Accepting00a00wide00variety00of00deposits,00offering00investment00products,00providin
g00loans,00and00brokering00financial00transactions
Which00type00of00financial00institution00is00a00mutual00fund?
Contractual00institution
Federal00institution
Depository00institution
Investment00institution00-00ans--
✔✔Investment00institution.00Investment00institutions00provide00individuals00and00firms00a
ccess00to00financial00markets.
A00mutual00fund00-00ans--
✔✔A00mutual00fund00is00an00investment00company00that00continually00offers00investmen
ts00and00buys00financial00securities00and00instruments00(usually00stocks00or00bonds)00on
00behalf00of00investors.00Mutual00fund00companies00often00have00their00own00products00
or00portfolios00composed00of00multiple00stocks00and00bonds.00The00performance00of00th
e00funds00determines00the00company's00value.00Even00though00the00funds00are00a00pool
00of00financial00securities,00investors00normally00do00not00have00the00same00rights00that0
0individual00stockholders00have.
Which00financial00institution00specializes00in00managing00and00administering00retirement
00funds?
Pension00funds
Private00equity
Investment00banks00-00ans--✔✔Pension00funds00specialize00in00retirement00funds.
Which00type00of00economic00indicator00is00the00consumer00price00index?
,Lagging00indicator
Leading00indicator
Coincident00indicator00-00ans--
✔✔CPI00usually00changes00after00the00economy00as00a00whole00changes.00(CPI)00meas
ures00changes00in00the00inflation00rate.00It00examines00the00average00prices00of00a00bask
et00of00consumer00goods00and00services00and00the00changes00associated00with00the00co
st00of00living.00When00the00CPI00decreases,00it00indicates00deflation;00when00it00increase
s,00it00indicates00inflation.
A00company's00officers00and00board00of00directors00are00selling00their00stocks00in00the00fi
rm00at00higher00prices00due00to00false00accounting00reports00that00made00the00stock00se
em00more00valuable00than00it00truly00was.00Which00ethical00issue00is00occurring00in00this0
0situation?
Pursuing00individual00interest00over00client00interests
Conflict00between00work00and00personal00affairs
Agency00problem00due00to00conflicting00interests00-00ans--
✔✔Agency00problem00due00to00conflicting00interests!
00Accounting00manipulation00by00management00in00pursuit00of00higher00stock-
related00compensation00is00an00example00of00an00agency00problem.
Which00subspecialty00of00finance00primarily00involves00deciding00which00assets00will00cr
eate00more00wealth00and00earn00positive00returns?
Accounting
Financial00institutions
Capital00structure
Investments00-00ans--
✔✔Investments.00Investments00is00the00area00of00finance00that00seeks00to00create00wea
lth00in00the00future00by00deciding00where00to00allocate00money.
What00is00the00primary00goal00of00the00financial00manager00of00a00firm?
To00minimize00the00asset00holdings00of00the00firm
To00minimize00the00costs00of00the00firm
To00maximize00owner00wealth
To00maximize00the00manager's00utility00-00ans--
✔✔To00maximize00owner00wealth.00The00financial00manager00should00make00decisions0
0based00on00the00primary00goal00of00maximizing00owner00wealth.
Utility00-00ans--
✔✔Utility00is00an00economic00term00referring00to00the00total00satisfaction00received00fro
m00consuming00goods00and00services.00In00other00words,00utility00is00the00happiness00yo
u00gain00from00your00decisions00as00a00consumer.
What00should00be00the00main00question00a00firm00asks00when00considering00any00invest
ment00decision?00-00ans--
✔✔Do00the00benefits00of00this00investment00outweigh00the00costs?
,00For00any00investment,00you00should00expect00to00receive00a00benefit00worth00at00least0
0as00much00as00the00initial00cost.
What00is00the00primary00aim00of00personal00finance00goals?00-00ans--
✔✔To00maximize00satisfaction00from00products00purchased00and00services00obtained
Which00task00does00a00financial00manager00perform00when00choosing00to00obtain00a00lo
an00to00purchase00a00piece00of00equipment00for00a00new00project?
Making00credit00standard00decisions
Making00investment00decisions
Making00inventory00control00decisions
Making00financing00decisions00-00ans--
✔✔Making00financing00decisions.00The00manager00is00deciding00where00to00get00the00fu
nds00to00support00a00new00project,00which00means00the00manager00is00making00a00finan
cing00decision.
Which00financial00career00focuses00on00investing00capital00into00firms00whose00shares00
are00not00currently00sold00on00any00public00stock00exchange?
Private00equity
Financial00planning
Insurance
Corporate00finance00-00ans--
✔✔Private00equity00deals00with00investments00in00firms00that00are00privately00held00and0
0whose00ownership00is00not00yet00bought00or00sold00on00any00public00stock00exchange.
Which00task00does00a00financial00manager00perform00when00assessing00the00costs00and
00benefits00of00potential00projects?
Managing00working00capital
Making00financing00decisions
Making00investment00decisions
Implementing00financial00policies00-00ans--
✔✔Making00investment00decisions.00Understanding00how00benefits00weigh00up00against
00costs00is00the00first00priority00before00moving00forward00with00financing00and00manageri
al00decisions.
Three00main00tasks00that00a00financial00manager00of00a00firm00does00in00order00to00achie
ve00the00goal00of00the00firm,00which00is00to00maximize00shareholder00wealth.00-00ans--
✔✔making00investment00decisions
making00financing00decisions
managing00working00capital
How00does00a00financial00manager00manage00working00capital00-00ans--
✔✔The00manager00needs00pay00the00firm's00suppliers00and00many00other00day-to-
day00operations00by00setting00its00credit00standards00for00the00customers,00discussing00i
nventories00with00the00supply00chain00manager00(inventory00control)
, What00tool00can00you00use00to00understand00your00overall00personal00cash00flows?
Setting00financial00goals
Budgeting
Investing
Saving00-00ans--
✔✔Budgeting00helps00you00to00understand00your00income00and00expenses00and00to00an
alyze00your00cash00flows.
What00is00a00reasonable00alternative00to00keeping00an00emergency00stash00of00cash?
Investing00in00a00savings00account
Investing00the00money00in00a00nicer00car
Investing00in00high-risk00growth00stocks
Investing00in00long-term00bonds00-00ans--
✔✔Investing00in00a00savings00account.00Investing00in00a00readily00withdrawable00accoun
t00that00still00earns00some00interest00is00a00value-preserving00alternative.
You00want00to00buy00a00house,00so00you00obtain00a00mortgage00for00which00you00can00af
ford00the00monthly00payments.00What00process00have00you00engaged00in00as00part00of00
your00financial00decision-making?
Analyzing00data
Financing
Assessing
Investing00-00ans--
✔✔Financing.00Part00of00the00personal00finance00process00is00figuring00out00how00to00fin
ance00your00goals00in00a00way00that00is00within00your00means.
What00area00of00finance00involves00deciding00which00assets00to00invest00in00to00create00
wealth00in00the00future?
Investments
Organizational00finance
Financial00institutions
Investment00banking00-00ans--
✔✔Investments00are00an00area00of00finance00that00involves00deciding00which00assets00t
o00invest00in00to00create00wealth00in00the00future.
Hannah00is00the00financial00manager00of00a00firm.00A00project00that00she00has00recomme
nded00has00been00approved00and00will00cost00$500million.00Since00the00company00does0
0not00have00enough00cash00on00reserve,00Hannah00must00figure00out00how00to00raise00e
nough00money00to00start00the00project.00She00can00choose00whether00to00issue00new00b
onds,00new00stocks,00a00mortgage00loan,00or00some00combination00of00those00options.00
What00task00is00Hannah00performing00in00this00scenario?
Making00an00investment00decision
Managing00financial00investments
Managing00working00capital
Making00a00financing00decision00-00ans--
✔✔Making00a00financing00decision.00Since00the00project00has00already00been00approve
Which00area00of00finance00deals00with00sources00of00funding00and00the00capital00structur
e00of00corporations00and00seeks00to00increase00the00value00of00a00firm00to00its00owners?
Financial00institutions
Business00finance
Investments
Real00estate00-00ans--
✔✔Business00finance00is00the00area00of00finance00that00deals00with00uses00and00source
s00of00funding00to00increase00the00value00of00the00firm.
What00are00the00main00services00offered00by00financial00institutions?00-00ans--
✔✔Accepting00a00wide00variety00of00deposits,00offering00investment00products,00providin
g00loans,00and00brokering00financial00transactions
Which00type00of00financial00institution00is00a00mutual00fund?
Contractual00institution
Federal00institution
Depository00institution
Investment00institution00-00ans--
✔✔Investment00institution.00Investment00institutions00provide00individuals00and00firms00a
ccess00to00financial00markets.
A00mutual00fund00-00ans--
✔✔A00mutual00fund00is00an00investment00company00that00continually00offers00investmen
ts00and00buys00financial00securities00and00instruments00(usually00stocks00or00bonds)00on
00behalf00of00investors.00Mutual00fund00companies00often00have00their00own00products00
or00portfolios00composed00of00multiple00stocks00and00bonds.00The00performance00of00th
e00funds00determines00the00company's00value.00Even00though00the00funds00are00a00pool
00of00financial00securities,00investors00normally00do00not00have00the00same00rights00that0
0individual00stockholders00have.
Which00financial00institution00specializes00in00managing00and00administering00retirement
00funds?
Pension00funds
Private00equity
Investment00banks00-00ans--✔✔Pension00funds00specialize00in00retirement00funds.
Which00type00of00economic00indicator00is00the00consumer00price00index?
,Lagging00indicator
Leading00indicator
Coincident00indicator00-00ans--
✔✔CPI00usually00changes00after00the00economy00as00a00whole00changes.00(CPI)00meas
ures00changes00in00the00inflation00rate.00It00examines00the00average00prices00of00a00bask
et00of00consumer00goods00and00services00and00the00changes00associated00with00the00co
st00of00living.00When00the00CPI00decreases,00it00indicates00deflation;00when00it00increase
s,00it00indicates00inflation.
A00company's00officers00and00board00of00directors00are00selling00their00stocks00in00the00fi
rm00at00higher00prices00due00to00false00accounting00reports00that00made00the00stock00se
em00more00valuable00than00it00truly00was.00Which00ethical00issue00is00occurring00in00this0
0situation?
Pursuing00individual00interest00over00client00interests
Conflict00between00work00and00personal00affairs
Agency00problem00due00to00conflicting00interests00-00ans--
✔✔Agency00problem00due00to00conflicting00interests!
00Accounting00manipulation00by00management00in00pursuit00of00higher00stock-
related00compensation00is00an00example00of00an00agency00problem.
Which00subspecialty00of00finance00primarily00involves00deciding00which00assets00will00cr
eate00more00wealth00and00earn00positive00returns?
Accounting
Financial00institutions
Capital00structure
Investments00-00ans--
✔✔Investments.00Investments00is00the00area00of00finance00that00seeks00to00create00wea
lth00in00the00future00by00deciding00where00to00allocate00money.
What00is00the00primary00goal00of00the00financial00manager00of00a00firm?
To00minimize00the00asset00holdings00of00the00firm
To00minimize00the00costs00of00the00firm
To00maximize00owner00wealth
To00maximize00the00manager's00utility00-00ans--
✔✔To00maximize00owner00wealth.00The00financial00manager00should00make00decisions0
0based00on00the00primary00goal00of00maximizing00owner00wealth.
Utility00-00ans--
✔✔Utility00is00an00economic00term00referring00to00the00total00satisfaction00received00fro
m00consuming00goods00and00services.00In00other00words,00utility00is00the00happiness00yo
u00gain00from00your00decisions00as00a00consumer.
What00should00be00the00main00question00a00firm00asks00when00considering00any00invest
ment00decision?00-00ans--
✔✔Do00the00benefits00of00this00investment00outweigh00the00costs?
,00For00any00investment,00you00should00expect00to00receive00a00benefit00worth00at00least0
0as00much00as00the00initial00cost.
What00is00the00primary00aim00of00personal00finance00goals?00-00ans--
✔✔To00maximize00satisfaction00from00products00purchased00and00services00obtained
Which00task00does00a00financial00manager00perform00when00choosing00to00obtain00a00lo
an00to00purchase00a00piece00of00equipment00for00a00new00project?
Making00credit00standard00decisions
Making00investment00decisions
Making00inventory00control00decisions
Making00financing00decisions00-00ans--
✔✔Making00financing00decisions.00The00manager00is00deciding00where00to00get00the00fu
nds00to00support00a00new00project,00which00means00the00manager00is00making00a00finan
cing00decision.
Which00financial00career00focuses00on00investing00capital00into00firms00whose00shares00
are00not00currently00sold00on00any00public00stock00exchange?
Private00equity
Financial00planning
Insurance
Corporate00finance00-00ans--
✔✔Private00equity00deals00with00investments00in00firms00that00are00privately00held00and0
0whose00ownership00is00not00yet00bought00or00sold00on00any00public00stock00exchange.
Which00task00does00a00financial00manager00perform00when00assessing00the00costs00and
00benefits00of00potential00projects?
Managing00working00capital
Making00financing00decisions
Making00investment00decisions
Implementing00financial00policies00-00ans--
✔✔Making00investment00decisions.00Understanding00how00benefits00weigh00up00against
00costs00is00the00first00priority00before00moving00forward00with00financing00and00manageri
al00decisions.
Three00main00tasks00that00a00financial00manager00of00a00firm00does00in00order00to00achie
ve00the00goal00of00the00firm,00which00is00to00maximize00shareholder00wealth.00-00ans--
✔✔making00investment00decisions
making00financing00decisions
managing00working00capital
How00does00a00financial00manager00manage00working00capital00-00ans--
✔✔The00manager00needs00pay00the00firm's00suppliers00and00many00other00day-to-
day00operations00by00setting00its00credit00standards00for00the00customers,00discussing00i
nventories00with00the00supply00chain00manager00(inventory00control)
, What00tool00can00you00use00to00understand00your00overall00personal00cash00flows?
Setting00financial00goals
Budgeting
Investing
Saving00-00ans--
✔✔Budgeting00helps00you00to00understand00your00income00and00expenses00and00to00an
alyze00your00cash00flows.
What00is00a00reasonable00alternative00to00keeping00an00emergency00stash00of00cash?
Investing00in00a00savings00account
Investing00the00money00in00a00nicer00car
Investing00in00high-risk00growth00stocks
Investing00in00long-term00bonds00-00ans--
✔✔Investing00in00a00savings00account.00Investing00in00a00readily00withdrawable00accoun
t00that00still00earns00some00interest00is00a00value-preserving00alternative.
You00want00to00buy00a00house,00so00you00obtain00a00mortgage00for00which00you00can00af
ford00the00monthly00payments.00What00process00have00you00engaged00in00as00part00of00
your00financial00decision-making?
Analyzing00data
Financing
Assessing
Investing00-00ans--
✔✔Financing.00Part00of00the00personal00finance00process00is00figuring00out00how00to00fin
ance00your00goals00in00a00way00that00is00within00your00means.
What00area00of00finance00involves00deciding00which00assets00to00invest00in00to00create00
wealth00in00the00future?
Investments
Organizational00finance
Financial00institutions
Investment00banking00-00ans--
✔✔Investments00are00an00area00of00finance00that00involves00deciding00which00assets00t
o00invest00in00to00create00wealth00in00the00future.
Hannah00is00the00financial00manager00of00a00firm.00A00project00that00she00has00recomme
nded00has00been00approved00and00will00cost00$500million.00Since00the00company00does0
0not00have00enough00cash00on00reserve,00Hannah00must00figure00out00how00to00raise00e
nough00money00to00start00the00project.00She00can00choose00whether00to00issue00new00b
onds,00new00stocks,00a00mortgage00loan,00or00some00combination00of00those00options.00
What00task00is00Hannah00performing00in00this00scenario?
Making00an00investment00decision
Managing00financial00investments
Managing00working00capital
Making00a00financing00decision00-00ans--
✔✔Making00a00financing00decision.00Since00the00project00has00already00been00approve
