Principles of Finance- D076 WGU |187 Questions with
verified answers
1
What is the primary goal of the financial manager of a firm? Ans✓✓✓-To
maximize owner wealth
3
What is the primary aim of personal finance goals? Ans✓✓✓-To maximize
satisfaction from products purchased and services obtained
3
Which subspecialty of finance primarily involves deciding which assets will create
more wealth and earn positive returns? Ans✓✓✓-Investments
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 is trying to decide which of four projects to invest in. Ans✓✓✓-The
one with highest NPV amount
,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? Ans✓✓✓-
Making financing decisions
A firm has paid off its short-term loans more quickly in the past couple of years.
What might this trend indicate about the firm's financial ratios? Ans✓✓✓-Its
liquidity ratio is increasing. Liquidity is a measure of the ability of a firm to convert
short-term assets into cash. Paying off short-term loans quickly is an indication
that a firm is quite liquid, so the firm's liquidity ratio would be increasing.
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 hypothesized estimate of future returns under different scenarios based on
expectational data Ans✓✓✓-An expected return
A large corporation is looking to merge with another large corporation. Which
financial institution can help them do this? Ans✓✓✓-Investment bank
A local start-up company just hit its five-year anniversary and is planning an initial
public offering sometime this year. In order to issue public stock, which market
will the company use? Ans✓✓✓-When a company issues stock for the first time
to raise capital, shares must initially be sold through a primary market.
, 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 the 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
About a year ago, the short-term Treasury bill had 1.54% interest and the long-
term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an
interest rate of 3.13%, while the 10-year Treasury note has an interest rate of
2.28%. What does this information indicate about the future economy?
Ans✓✓✓-It may indicate an economic downturn. Since the long-term Treasury
interest rate is lower than the short-term rate, it has an inverted yield curve,
which may indicate an economic downturn.
Activity ratios Ans✓✓✓-measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
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 bought 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
verified answers
1
What is the primary goal of the financial manager of a firm? Ans✓✓✓-To
maximize owner wealth
3
What is the primary aim of personal finance goals? Ans✓✓✓-To maximize
satisfaction from products purchased and services obtained
3
Which subspecialty of finance primarily involves deciding which assets will create
more wealth and earn positive returns? Ans✓✓✓-Investments
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 is trying to decide which of four projects to invest in. Ans✓✓✓-The
one with highest NPV amount
,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? Ans✓✓✓-
Making financing decisions
A firm has paid off its short-term loans more quickly in the past couple of years.
What might this trend indicate about the firm's financial ratios? Ans✓✓✓-Its
liquidity ratio is increasing. Liquidity is a measure of the ability of a firm to convert
short-term assets into cash. Paying off short-term loans quickly is an indication
that a firm is quite liquid, so the firm's liquidity ratio would be increasing.
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 hypothesized estimate of future returns under different scenarios based on
expectational data Ans✓✓✓-An expected return
A large corporation is looking to merge with another large corporation. Which
financial institution can help them do this? Ans✓✓✓-Investment bank
A local start-up company just hit its five-year anniversary and is planning an initial
public offering sometime this year. In order to issue public stock, which market
will the company use? Ans✓✓✓-When a company issues stock for the first time
to raise capital, shares must initially be sold through a primary market.
, 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 the 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
About a year ago, the short-term Treasury bill had 1.54% interest and the long-
term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an
interest rate of 3.13%, while the 10-year Treasury note has an interest rate of
2.28%. What does this information indicate about the future economy?
Ans✓✓✓-It may indicate an economic downturn. Since the long-term Treasury
interest rate is lower than the short-term rate, it has an inverted yield curve,
which may indicate an economic downturn.
Activity ratios Ans✓✓✓-measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
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 bought 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
