D076 WGU TEST + QUIZZES QUESTIONS & ANSWERS
Which area of finance deals with sources of funding and the capital structure of
corporations and seeks to increase the value of a firm to its owners?
Financial institutions
Business finance
Investments
Real estate - Answer -Business finance is the area of finance that deals with uses and
sources of funding to increase the value of the firm.
What are the main services offered by financial institutions? - Answer -Accepting a
wide variety of deposits, offering investment products, providing loans, and brokering
financial transactions
Which type of financial institution is a mutual fund?
Contractual institution
Federal institution
Depository institution
Investment institution - Answer -Investment institution. Investment institutions provide
individuals and firms access to financial markets.
Which type of economic indicator is the consumer price index?
Lagging indicator
Leading indicator
Coincident indicator - Answer -CPI usually changes after the economy as a whole
changes. (CPI) measures changes in the inflation rate. It examines the average prices
of a basket of consumer goods and services and the changes associated with the cost
of living. When the CPI decreases, it indicates deflation; when it increases, it indicates
inflation.
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?
Pursuing individual interest over client interests
Conflict between work and personal affairs
Agency problem due to conflicting interests - Answer -Agency problem due to
conflicting interests! Accounting manipulation by management in pursuit of higher stock-
related compensation is an example of an agency problem.
Which subspecialty of finance primarily involves deciding which assets will create more
wealth and earn positive returns?
Accounting
Financial institutions
Capital structure
,Investments - Answer -Investments. Investments is the area of finance that seeks to
create wealth in the future by deciding where to allocate money.
What is the primary goal of the financial manager of a firm?
To minimize the asset holdings of the firm
To minimize the costs of the firm
To maximize owner wealth
To maximize the manager's utility - Answer -To maximize owner wealth. The financial
manager should make decisions based on the primary goal of maximizing owner
wealth.
Utility - Answer -Utility is an economic term referring to the total satisfaction received
from consuming goods and services. In other words, utility is the happiness you gain
from your decisions as a consumer.
What should be the main question a firm asks when considering any investment
decision? - Answer -Do the benefits of this investment outweigh the costs? For any
investment, you should expect to receive a benefit worth at least as much as the initial
cost.
A mutual fund - Answer -A mutual fund is an investment company that continually
offers investments and buys financial securities and instruments (usually stocks or
bonds) on behalf of investors. Mutual fund companies often have their own products or
portfolios composed of multiple stocks and bonds. The performance of the funds
determines the company's value. Even though the funds are a pool of financial
securities, investors normally do not have the same rights that individual stockholders
have.
Which financial institution specializes in managing and administering retirement funds?
Pension funds
Private equity
Investment banks - Answer -Pension funds specialize in retirement funds.
What is the primary aim of personal finance goals? - Answer -To maximize satisfaction
from products purchased and services obtained
Which task does a financial manager perform when choosing to obtain a loan to
purchase a piece of equipment for a new project?
Making credit standard decisions
Making investment decisions
Making inventory control decisions
Making financing decisions - Answer -Making financing decisions. The manager is
deciding where to get the funds to support a new project, which means the manager is
making a financing decision.
,Which financial career focuses on investing capital into firms whose shares are not
currently sold on any public stock exchange?
Private equity
Financial planning
Insurance
Corporate finance - Answer -Private equity deals with investments in firms that are
privately held and whose ownership is not yet bought or sold on any public stock
exchange.
Which task does a financial manager perform when assessing the costs and benefits of
potential projects?
Managing working capital
Making financing decisions
Making investment decisions
Implementing financial policies - Answer -Making investment decisions. Understanding
how benefits weigh up against costs is the first priority before moving forward with
financing and managerial decisions.
Three main tasks that a financial manager of a firm does in order to achieve the goal of
the firm, which is to maximize shareholder wealth. - Answer -making investment
decisions
making financing decisions
managing working capital
How does a financial manager manage working capital - Answer -The manager needs
pay the firm's suppliers and many other day-to-day operations by setting its credit
standards for the customers, discussing inventories with the supply chain manager
(inventory control)
What tool can you use to understand your overall personal cash flows?
Setting financial goals
Budgeting
Investing
Saving - Answer -Budgeting helps you to understand your income and expenses and to
analyze your cash flows.
What is a reasonable alternative to keeping an emergency stash of cash?
Investing in a savings account
Investing the money in a nicer car
Investing in high-risk growth stocks
Investing in long-term bonds - Answer -Investing in a savings account. Investing in a
readily withdrawable account that still earns some interest is a value-preserving
alternative.
, You want to buy a house, so you obtain a mortgage for which you can afford the
monthly payments. What process have you engaged in as part of your financial
decision-making?
Analyzing data
Financing
Assessing
Investing - Answer -Financing. Part of the personal finance process is figuring out how
to finance your goals in a way that is within your means.
What area of finance involves deciding which assets to invest in to create wealth in the
future?
Investments
Organizational finance
Financial institutions
Investment banking - Answer -Investments are an area of finance that involves
deciding which assets to invest in to create wealth in the future.
Hannah is the financial manager of a firm. A project that she has recommended has
been approved and will cost $5 million. Since the company does not have enough cash
on reserve, Hannah must figure out how to raise enough money to start the project. She
can choose whether to issue new bonds, new stocks, a mortgage loan, or some
combination of those options. What task is Hannah performing in this scenario?
Making an investment decision
Managing financial investments
Managing working capital
Making a financing decision - Answer -Making a financing decision. Since the project
has already been approved, Hannah is trying to find a way to finance the investment
and considering its capital structure.
Maria and Mateo are setting financial goals. They decide that they need to save $200
each month to reach their goal of taking their children to visit their grandparents in Spain
next summer. What is the objective of setting such a goal?
To minimize personal expenses
To set priorities in personal finances
To maximize individual utility
To make personal finances predictable - Answer -To maximize individual utility. While
everyone has different personal financial goals, the objectives of such goals is to
maximize individual utility.
Which professional works with individuals to help them achieve their financial goals?
Commercial banker
Corporate financial analyst
Private equity manager
Financial planner - Answer -Financial planner. Professional financial planners work with
individuals to help them achieve their financial goals.
Which area of finance deals with sources of funding and the capital structure of
corporations and seeks to increase the value of a firm to its owners?
Financial institutions
Business finance
Investments
Real estate - Answer -Business finance is the area of finance that deals with uses and
sources of funding to increase the value of the firm.
What are the main services offered by financial institutions? - Answer -Accepting a
wide variety of deposits, offering investment products, providing loans, and brokering
financial transactions
Which type of financial institution is a mutual fund?
Contractual institution
Federal institution
Depository institution
Investment institution - Answer -Investment institution. Investment institutions provide
individuals and firms access to financial markets.
Which type of economic indicator is the consumer price index?
Lagging indicator
Leading indicator
Coincident indicator - Answer -CPI usually changes after the economy as a whole
changes. (CPI) measures changes in the inflation rate. It examines the average prices
of a basket of consumer goods and services and the changes associated with the cost
of living. When the CPI decreases, it indicates deflation; when it increases, it indicates
inflation.
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?
Pursuing individual interest over client interests
Conflict between work and personal affairs
Agency problem due to conflicting interests - Answer -Agency problem due to
conflicting interests! Accounting manipulation by management in pursuit of higher stock-
related compensation is an example of an agency problem.
Which subspecialty of finance primarily involves deciding which assets will create more
wealth and earn positive returns?
Accounting
Financial institutions
Capital structure
,Investments - Answer -Investments. Investments is the area of finance that seeks to
create wealth in the future by deciding where to allocate money.
What is the primary goal of the financial manager of a firm?
To minimize the asset holdings of the firm
To minimize the costs of the firm
To maximize owner wealth
To maximize the manager's utility - Answer -To maximize owner wealth. The financial
manager should make decisions based on the primary goal of maximizing owner
wealth.
Utility - Answer -Utility is an economic term referring to the total satisfaction received
from consuming goods and services. In other words, utility is the happiness you gain
from your decisions as a consumer.
What should be the main question a firm asks when considering any investment
decision? - Answer -Do the benefits of this investment outweigh the costs? For any
investment, you should expect to receive a benefit worth at least as much as the initial
cost.
A mutual fund - Answer -A mutual fund is an investment company that continually
offers investments and buys financial securities and instruments (usually stocks or
bonds) on behalf of investors. Mutual fund companies often have their own products or
portfolios composed of multiple stocks and bonds. The performance of the funds
determines the company's value. Even though the funds are a pool of financial
securities, investors normally do not have the same rights that individual stockholders
have.
Which financial institution specializes in managing and administering retirement funds?
Pension funds
Private equity
Investment banks - Answer -Pension funds specialize in retirement funds.
What is the primary aim of personal finance goals? - Answer -To maximize satisfaction
from products purchased and services obtained
Which task does a financial manager perform when choosing to obtain a loan to
purchase a piece of equipment for a new project?
Making credit standard decisions
Making investment decisions
Making inventory control decisions
Making financing decisions - Answer -Making financing decisions. The manager is
deciding where to get the funds to support a new project, which means the manager is
making a financing decision.
,Which financial career focuses on investing capital into firms whose shares are not
currently sold on any public stock exchange?
Private equity
Financial planning
Insurance
Corporate finance - Answer -Private equity deals with investments in firms that are
privately held and whose ownership is not yet bought or sold on any public stock
exchange.
Which task does a financial manager perform when assessing the costs and benefits of
potential projects?
Managing working capital
Making financing decisions
Making investment decisions
Implementing financial policies - Answer -Making investment decisions. Understanding
how benefits weigh up against costs is the first priority before moving forward with
financing and managerial decisions.
Three main tasks that a financial manager of a firm does in order to achieve the goal of
the firm, which is to maximize shareholder wealth. - Answer -making investment
decisions
making financing decisions
managing working capital
How does a financial manager manage working capital - Answer -The manager needs
pay the firm's suppliers and many other day-to-day operations by setting its credit
standards for the customers, discussing inventories with the supply chain manager
(inventory control)
What tool can you use to understand your overall personal cash flows?
Setting financial goals
Budgeting
Investing
Saving - Answer -Budgeting helps you to understand your income and expenses and to
analyze your cash flows.
What is a reasonable alternative to keeping an emergency stash of cash?
Investing in a savings account
Investing the money in a nicer car
Investing in high-risk growth stocks
Investing in long-term bonds - Answer -Investing in a savings account. Investing in a
readily withdrawable account that still earns some interest is a value-preserving
alternative.
, You want to buy a house, so you obtain a mortgage for which you can afford the
monthly payments. What process have you engaged in as part of your financial
decision-making?
Analyzing data
Financing
Assessing
Investing - Answer -Financing. Part of the personal finance process is figuring out how
to finance your goals in a way that is within your means.
What area of finance involves deciding which assets to invest in to create wealth in the
future?
Investments
Organizational finance
Financial institutions
Investment banking - Answer -Investments are an area of finance that involves
deciding which assets to invest in to create wealth in the future.
Hannah is the financial manager of a firm. A project that she has recommended has
been approved and will cost $5 million. Since the company does not have enough cash
on reserve, Hannah must figure out how to raise enough money to start the project. She
can choose whether to issue new bonds, new stocks, a mortgage loan, or some
combination of those options. What task is Hannah performing in this scenario?
Making an investment decision
Managing financial investments
Managing working capital
Making a financing decision - Answer -Making a financing decision. Since the project
has already been approved, Hannah is trying to find a way to finance the investment
and considering its capital structure.
Maria and Mateo are setting financial goals. They decide that they need to save $200
each month to reach their goal of taking their children to visit their grandparents in Spain
next summer. What is the objective of setting such a goal?
To minimize personal expenses
To set priorities in personal finances
To maximize individual utility
To make personal finances predictable - Answer -To maximize individual utility. While
everyone has different personal financial goals, the objectives of such goals is to
maximize individual utility.
Which professional works with individuals to help them achieve their financial goals?
Commercial banker
Corporate financial analyst
Private equity manager
Financial planner - Answer -Financial planner. Professional financial planners work with
individuals to help them achieve their financial goals.
