D076 Finance Skills for Managers - Pre Assessment
questions with verified answers
A company calculated variances of a budget and actual cash flows that indicate
the firm's strengths and weaknesses in cash flows and its budgeting process.
Which major use of cash budgeting is this an example of? Ans✓✓✓-Performance
Evaluation
A company is developing a financial forecast for the next year. The company plans
to implement a new factory that will increase production and resulting sales by
20%.
Since the company's assets are increasing significantly, what else must increase?
Ans✓✓✓-Financing
A company that manufactures televisions must obtain financing to increase the
company's inventory levels. A manager at the company knows that current
investment markets are tight, and it may be difficult for the company to obtain
additional financing for the next year. The manager wants to propose a way for
the firm to reduce its discretionary financing needed (DFN).
What should the manager suggest to reduce next year's DFN? Ans✓✓✓-Lower
the amount of dividends paid out to shareholders next year
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. Ans✓✓✓-Making Financing Decision
A firm is currently operating at 75% capacity with current sales of $34 million.
, Will the firm need to acquire additional fixed assets if its sales are predicted to
increase by $6 million next year? Ans✓✓✓-No, because the increase in sales will
not exceed the firm's sales capacity
A pharmaceutical company recently spent $2 million developing a new drug. The
company then conducts capital budgeting analysis to determine if it should
produce the newly developed drug. The net present value (NPV) of the project is
$1.5 million.
Why should this company produce the drug? Ans✓✓✓-Because NPV is greater
than zero
A sign company is planning to have an initial public offering (IPO). In which type of
market will its stock first be sold to the public? Ans✓✓✓-Primary Market
An employee was recently hired as a financial analyst and asked to create a cash
budget for the employee's division for the next year.
Which component should the employee exclude from the budget? Ans✓✓✓-
Purchase of equipment that will be ought in three years
An energy company discovers that a new bill has been proposed to change the
amount of fuel that can be exported outside the country. If passed, this could
have a serious negative effect on the company's revenues. Some of the
company's competitors are obtaining insurance policies to compensate for this
risk, but since the energy company believes the likelihood of this bill passing is
low, it chooses to do nothing—ultimately taking responsibility for this particular
risk instead of trying to transfer the risk through an insurance policy.
Which risk management technique is this choice an example of? Ans✓✓✓-Risk
Retention
questions with verified answers
A company calculated variances of a budget and actual cash flows that indicate
the firm's strengths and weaknesses in cash flows and its budgeting process.
Which major use of cash budgeting is this an example of? Ans✓✓✓-Performance
Evaluation
A company is developing a financial forecast for the next year. The company plans
to implement a new factory that will increase production and resulting sales by
20%.
Since the company's assets are increasing significantly, what else must increase?
Ans✓✓✓-Financing
A company that manufactures televisions must obtain financing to increase the
company's inventory levels. A manager at the company knows that current
investment markets are tight, and it may be difficult for the company to obtain
additional financing for the next year. The manager wants to propose a way for
the firm to reduce its discretionary financing needed (DFN).
What should the manager suggest to reduce next year's DFN? Ans✓✓✓-Lower
the amount of dividends paid out to shareholders next year
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. Ans✓✓✓-Making Financing Decision
A firm is currently operating at 75% capacity with current sales of $34 million.
, Will the firm need to acquire additional fixed assets if its sales are predicted to
increase by $6 million next year? Ans✓✓✓-No, because the increase in sales will
not exceed the firm's sales capacity
A pharmaceutical company recently spent $2 million developing a new drug. The
company then conducts capital budgeting analysis to determine if it should
produce the newly developed drug. The net present value (NPV) of the project is
$1.5 million.
Why should this company produce the drug? Ans✓✓✓-Because NPV is greater
than zero
A sign company is planning to have an initial public offering (IPO). In which type of
market will its stock first be sold to the public? Ans✓✓✓-Primary Market
An employee was recently hired as a financial analyst and asked to create a cash
budget for the employee's division for the next year.
Which component should the employee exclude from the budget? Ans✓✓✓-
Purchase of equipment that will be ought in three years
An energy company discovers that a new bill has been proposed to change the
amount of fuel that can be exported outside the country. If passed, this could
have a serious negative effect on the company's revenues. Some of the
company's competitors are obtaining insurance policies to compensate for this
risk, but since the energy company believes the likelihood of this bill passing is
low, it chooses to do nothing—ultimately taking responsibility for this particular
risk instead of trying to transfer the risk through an insurance policy.
Which risk management technique is this choice an example of? Ans✓✓✓-Risk
Retention
