WGU D076 Finance Skills for Managers |375 questions
with verified answers
A firm-specific risk that comes from the probability of a loss resulting from a
borrower's failure to repay a contractual obligation Ans✓✓✓-What is default
risk?
A stream of semi-annual interest payments (an annuity)
A final principal repayment (a lump sum) Ans✓✓✓-What are the two distinct
parts of bond cash flows?
Accounting Ans✓✓✓-The system of recording, reporting, and summarizing past
financial information and transactions.
Accounts Receivable Turnover (AR Turnover) Ans✓✓✓-An activity ratio found by
credit sales divided by accounts receivable.
Activity Ratios Ans✓✓✓-A category of ratios that measure how well a company
uses its assets to generate sales or cash, showing the firm's operational efficiency
and profitability.
Activity ratios measure how well a company uses its assets to generate sales or
cash. Ans✓✓✓-What do activity ratios measure?
Activity ratios such as inventory turnover, accounts receivable (AR) turnover, and
average collection period (ACP) are used to check short-term operating asset
management efficiency, while total asset turnover (TAT), fixed asset turnover
(FAT), and operating income return on investment (OIROI) assess how well a firm
is using its assets to generate sales. Ans✓✓✓-What are activity ratios used for?
,Additional Funds Needed (AFN) Ans✓✓✓-Another name for the discretionary
financing needed or external financing needed. It represents the additional
financing needed given a firm's expectations for future growth.
Affirmative Covenants Ans✓✓✓-A bond covenant that describes things the
company pledges itself to do in order to protect bondholders.
After pro-forma financial statements are forecasted using the percent of sales
method
Once all the financial statements are projected according to a given set of
assumptions, you can determine the financing required to fund the predicted
growth in sales. Ans✓✓✓-When can the discretionary financing needed (DFN) be
determined?
Agency Costs Ans✓✓✓-Costs that are incurred when management does not act
in the best interest of shareholders.
Agency Problem Ans✓✓✓-When the agent (the management) does not act in the
best interest of the principle (the owners).
Agency problem due to conflicting interests Ans✓✓✓-A company's officers and
board of directors are selling their stocks in the firm at higher prices due to false
accounting reports that made the stock seem more valuable than it truly was.
Which ethical issue is occurring in this situation?
Agency problem. It is a luxury that does not improve shareholder value and costs
the company money. Ans✓✓✓-What kind of problem is this: A manager
purchases a company car and allocates it as a company expense.
,Aggressive Assets Ans✓✓✓-Companies or securities with beta greater than 1.
Aligning managers' interests with shareholders' interests. This is most commonly
done by compensating management with shares of ownership in the company.
Ans✓✓✓-How can agency costs be mitigated?
Also known as the face value of the bond, the par value is the sum of money that
the corporation promises to pay at the bond's expiration. In most cases, it is also
the amount that the bondholder gives to the corporation when the bond is
initially issued. For corporate bonds in North America, the par value is almost
always $1,000. Ans✓✓✓-What is Par Value?
An inaccurate required rate estimate could cause a firm to reject good projects or
accept bad projects. Ans✓✓✓-Why is it important to have an accurate, carefully
calculated required rate of return as part of the NPV?
Annual Percentage Rate Ans✓✓✓-The annual interest rate that is charged for
borrowing money or that is earned through investment.
Annuity Ans✓✓✓-A stream of cash flows of an equal amount paid every
consecutive period.
Annuity Due Ans✓✓✓-A series of equal payments made at the beginning of
consecutive periods.
AR Turnover equation Ans✓✓✓-AR Turnover=Credit Sales/Accounts Receivable
, Asset Pricing Ans✓✓✓-The process of valuing assets.
Auction Market Ans✓✓✓-A secondary market with a physical location and where
prices are determined by investors' willingness to pay.
Average Collection Period (ACP) Ans✓✓✓-An activity ratio found by the number
of days in a year (365) divided by AR turnover.
Average Collection Period equation Ans✓✓✓-Average Collection Period=365/AR
Turnover
(AR Turnover=Credit Sales/Accounts Receivable)
Balance Sheet Forecasting Ans✓✓✓-Using sales growth and the profit forecast to
construct a pro forma balance sheet to understand the future implications of the
sources and uses of finances.
Bank Ans✓✓✓-The lowest rate of return is required by which type of investor or
lender?
Banks and Credit Unions Ans✓✓✓-Receive deposits and extend loans to
individuals and businesses.
Because cash flows for a project may be uncertain Ans✓✓✓-Why is it important
to consider the cost of capital in an ideal evaluation method of capital
investment?
with verified answers
A firm-specific risk that comes from the probability of a loss resulting from a
borrower's failure to repay a contractual obligation Ans✓✓✓-What is default
risk?
A stream of semi-annual interest payments (an annuity)
A final principal repayment (a lump sum) Ans✓✓✓-What are the two distinct
parts of bond cash flows?
Accounting Ans✓✓✓-The system of recording, reporting, and summarizing past
financial information and transactions.
Accounts Receivable Turnover (AR Turnover) Ans✓✓✓-An activity ratio found by
credit sales divided by accounts receivable.
Activity Ratios Ans✓✓✓-A category of ratios that measure how well a company
uses its assets to generate sales or cash, showing the firm's operational efficiency
and profitability.
Activity ratios measure how well a company uses its assets to generate sales or
cash. Ans✓✓✓-What do activity ratios measure?
Activity ratios such as inventory turnover, accounts receivable (AR) turnover, and
average collection period (ACP) are used to check short-term operating asset
management efficiency, while total asset turnover (TAT), fixed asset turnover
(FAT), and operating income return on investment (OIROI) assess how well a firm
is using its assets to generate sales. Ans✓✓✓-What are activity ratios used for?
,Additional Funds Needed (AFN) Ans✓✓✓-Another name for the discretionary
financing needed or external financing needed. It represents the additional
financing needed given a firm's expectations for future growth.
Affirmative Covenants Ans✓✓✓-A bond covenant that describes things the
company pledges itself to do in order to protect bondholders.
After pro-forma financial statements are forecasted using the percent of sales
method
Once all the financial statements are projected according to a given set of
assumptions, you can determine the financing required to fund the predicted
growth in sales. Ans✓✓✓-When can the discretionary financing needed (DFN) be
determined?
Agency Costs Ans✓✓✓-Costs that are incurred when management does not act
in the best interest of shareholders.
Agency Problem Ans✓✓✓-When the agent (the management) does not act in the
best interest of the principle (the owners).
Agency problem due to conflicting interests Ans✓✓✓-A company's officers and
board of directors are selling their stocks in the firm at higher prices due to false
accounting reports that made the stock seem more valuable than it truly was.
Which ethical issue is occurring in this situation?
Agency problem. It is a luxury that does not improve shareholder value and costs
the company money. Ans✓✓✓-What kind of problem is this: A manager
purchases a company car and allocates it as a company expense.
,Aggressive Assets Ans✓✓✓-Companies or securities with beta greater than 1.
Aligning managers' interests with shareholders' interests. This is most commonly
done by compensating management with shares of ownership in the company.
Ans✓✓✓-How can agency costs be mitigated?
Also known as the face value of the bond, the par value is the sum of money that
the corporation promises to pay at the bond's expiration. In most cases, it is also
the amount that the bondholder gives to the corporation when the bond is
initially issued. For corporate bonds in North America, the par value is almost
always $1,000. Ans✓✓✓-What is Par Value?
An inaccurate required rate estimate could cause a firm to reject good projects or
accept bad projects. Ans✓✓✓-Why is it important to have an accurate, carefully
calculated required rate of return as part of the NPV?
Annual Percentage Rate Ans✓✓✓-The annual interest rate that is charged for
borrowing money or that is earned through investment.
Annuity Ans✓✓✓-A stream of cash flows of an equal amount paid every
consecutive period.
Annuity Due Ans✓✓✓-A series of equal payments made at the beginning of
consecutive periods.
AR Turnover equation Ans✓✓✓-AR Turnover=Credit Sales/Accounts Receivable
, Asset Pricing Ans✓✓✓-The process of valuing assets.
Auction Market Ans✓✓✓-A secondary market with a physical location and where
prices are determined by investors' willingness to pay.
Average Collection Period (ACP) Ans✓✓✓-An activity ratio found by the number
of days in a year (365) divided by AR turnover.
Average Collection Period equation Ans✓✓✓-Average Collection Period=365/AR
Turnover
(AR Turnover=Credit Sales/Accounts Receivable)
Balance Sheet Forecasting Ans✓✓✓-Using sales growth and the profit forecast to
construct a pro forma balance sheet to understand the future implications of the
sources and uses of finances.
Bank Ans✓✓✓-The lowest rate of return is required by which type of investor or
lender?
Banks and Credit Unions Ans✓✓✓-Receive deposits and extend loans to
individuals and businesses.
Because cash flows for a project may be uncertain Ans✓✓✓-Why is it important
to consider the cost of capital in an ideal evaluation method of capital
investment?
