Finance Skills for Managers - D076 questions with
verified answers
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.
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.
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 principal (the owners).
Aggressive Assets Ans✓✓✓-Companies or securities with beta greater than 1.
,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.
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.
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.
Banks and Credit Unions Ans✓✓✓-Receive deposits and extend loans to
individuals and businesses.
Benchmarking Ans✓✓✓-The process of completing a financial analysis to
compare a firm's financial performance to that of other similar firms.
, Beta Ans✓✓✓-A variable that describes how the price of a security varies with
the market.
Bid-ask Spread Ans✓✓✓-The difference between the bid and ask prices that
compensate the specialist for the risk that he or she bears for willingness to
provide liquidity.
Board of Directors Ans✓✓✓-A group of people who jointly supervise the
activities of an organization.
Bond Indenture Ans✓✓✓-A legal contract that governs the relationship between
a firm and its bondholders.
Bondholders Ans✓✓✓-A person who loans a corporation money by buying debt
securities.
Business Finance Ans✓✓✓-An area of finance that deals with sources of funding,
the capital structure of corporations, the actions that managers take to increase
the value of the firm to its owners, and the tools and analysis used to allocate
financial resources.
Cannibalization Ans✓✓✓-The reduction in sales of a company's own products
due to introduction of another similar product.
Capital Asset Pricing Model (CAPM) Ans✓✓✓-A model used to determine the
risk-return relationship for an asset.
verified answers
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.
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.
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 principal (the owners).
Aggressive Assets Ans✓✓✓-Companies or securities with beta greater than 1.
,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.
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.
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.
Banks and Credit Unions Ans✓✓✓-Receive deposits and extend loans to
individuals and businesses.
Benchmarking Ans✓✓✓-The process of completing a financial analysis to
compare a firm's financial performance to that of other similar firms.
, Beta Ans✓✓✓-A variable that describes how the price of a security varies with
the market.
Bid-ask Spread Ans✓✓✓-The difference between the bid and ask prices that
compensate the specialist for the risk that he or she bears for willingness to
provide liquidity.
Board of Directors Ans✓✓✓-A group of people who jointly supervise the
activities of an organization.
Bond Indenture Ans✓✓✓-A legal contract that governs the relationship between
a firm and its bondholders.
Bondholders Ans✓✓✓-A person who loans a corporation money by buying debt
securities.
Business Finance Ans✓✓✓-An area of finance that deals with sources of funding,
the capital structure of corporations, the actions that managers take to increase
the value of the firm to its owners, and the tools and analysis used to allocate
financial resources.
Cannibalization Ans✓✓✓-The reduction in sales of a company's own products
due to introduction of another similar product.
Capital Asset Pricing Model (CAPM) Ans✓✓✓-A model used to determine the
risk-return relationship for an asset.
