D076 - Finance Skills for Managers Exam Questions and Complete
Solutions Graded A+
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?
Business finance
Real estate
Investments
Financial institutions - correct answer Correct! Business finance is the area of finance that deals
with uses and sources of funding to increase the value of the firm.
What is the primary difference between finance and accounting?
Finance focuses on the future, while accounting is generally backward-looking.
Accounting involves investing and forecasting, while finance summarizes a company's financial
information.
Finance provides financial data to decision makers, and accounting involves making decisions
using that data.
Accounting focuses on the future, while finance is generally backward-looking. - correct answer
Correct! Finance is the management and allocation of capital with the objectives of investing,
forecasting, budgeting, saving, lending, and borrowing.
Which subspecialty of finance primarily involves deciding which assets will create more wealth
and earn positive returns?
Accounting
Investments.
Capital structure
Financial institutions - correct answer Investments
Correct! 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 maximize the manager's utility
To maximize owner wealth
,To minimize the costs of the firm - correct answer To maximize owner wealth
Correct! The financial manager should make decisions based on the primary goal of maximizing
owner wealth.
What should be the main question a firm asks when considering any investment decision?
Will this investment add value to the firm?
Do the benefits of this investment outweigh the costs?
What is the best investment in the stock market?
Will this investment help the company reduce costs? - correct answer Do the benefits of this
investment outweigh the costs?
Correct! For any investment, you should expect to receive a benefit worth at least as much as
the initial cost.
What is the primary aim of personal finance goals?
To create more wealth and returns on investments
To increase consumption of goods and services
To maximize satisfaction from products purchased and services obtained
To maximize shareholders' utility by increasing a firm's value - correct answer To maximize
satisfaction from products purchased and services obtained
Correct! The objective of personal financial goals is to maximize one's utility.
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 financing decisions
Making investment decisions
Making inventory control decisions - correct answer Making financing decisions
Correct! 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
,Corporate finance
Insurance
Financial planning - correct answer Private equity
Correct! 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?
Making investment decisions
Managing working capital
Implementing financial policies
Making financing decisions - correct answer Making investment decisions
Correct! Understanding how benefits weigh up against costs is the first priority before moving
forward with financing and managerial decisions.
What tool can you use to understand your overall personal cash flows?
Investing
Budgeting
Saving
Setting financial goals - correct answer Budgeting
Correct! 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 the money in a nicer car
Investing in a savings account
Investing in high-risk growth stocks
Investing in long-term bonds - correct answer Investing in a savings account
Correct! 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?
, Investing
Analyzing data
Financing
Assessing - correct answer Financing
Correct! 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
Investment banking
Financial institutions
Organizational finance - correct answer Investments
Correct! 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?
Managing financial investments
Making an investment decision
Managing working capital
Making a financing decision - correct answer Making a financing decision
Correct! 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 set priorities in personal finances
To minimize personal expenses
To make personal finances predictable
Solutions Graded A+
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?
Business finance
Real estate
Investments
Financial institutions - correct answer Correct! Business finance is the area of finance that deals
with uses and sources of funding to increase the value of the firm.
What is the primary difference between finance and accounting?
Finance focuses on the future, while accounting is generally backward-looking.
Accounting involves investing and forecasting, while finance summarizes a company's financial
information.
Finance provides financial data to decision makers, and accounting involves making decisions
using that data.
Accounting focuses on the future, while finance is generally backward-looking. - correct answer
Correct! Finance is the management and allocation of capital with the objectives of investing,
forecasting, budgeting, saving, lending, and borrowing.
Which subspecialty of finance primarily involves deciding which assets will create more wealth
and earn positive returns?
Accounting
Investments.
Capital structure
Financial institutions - correct answer Investments
Correct! 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 maximize the manager's utility
To maximize owner wealth
,To minimize the costs of the firm - correct answer To maximize owner wealth
Correct! The financial manager should make decisions based on the primary goal of maximizing
owner wealth.
What should be the main question a firm asks when considering any investment decision?
Will this investment add value to the firm?
Do the benefits of this investment outweigh the costs?
What is the best investment in the stock market?
Will this investment help the company reduce costs? - correct answer Do the benefits of this
investment outweigh the costs?
Correct! For any investment, you should expect to receive a benefit worth at least as much as
the initial cost.
What is the primary aim of personal finance goals?
To create more wealth and returns on investments
To increase consumption of goods and services
To maximize satisfaction from products purchased and services obtained
To maximize shareholders' utility by increasing a firm's value - correct answer To maximize
satisfaction from products purchased and services obtained
Correct! The objective of personal financial goals is to maximize one's utility.
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 financing decisions
Making investment decisions
Making inventory control decisions - correct answer Making financing decisions
Correct! 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
,Corporate finance
Insurance
Financial planning - correct answer Private equity
Correct! 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?
Making investment decisions
Managing working capital
Implementing financial policies
Making financing decisions - correct answer Making investment decisions
Correct! Understanding how benefits weigh up against costs is the first priority before moving
forward with financing and managerial decisions.
What tool can you use to understand your overall personal cash flows?
Investing
Budgeting
Saving
Setting financial goals - correct answer Budgeting
Correct! 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 the money in a nicer car
Investing in a savings account
Investing in high-risk growth stocks
Investing in long-term bonds - correct answer Investing in a savings account
Correct! 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?
, Investing
Analyzing data
Financing
Assessing - correct answer Financing
Correct! 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
Investment banking
Financial institutions
Organizational finance - correct answer Investments
Correct! 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?
Managing financial investments
Making an investment decision
Managing working capital
Making a financing decision - correct answer Making a financing decision
Correct! 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 set priorities in personal finances
To minimize personal expenses
To make personal finances predictable
