D076 Test Answers
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1. In which way is accounting different from finance? Accounting is
Accounting is backward looking, while finance is fo- backward looking,
cused on the future. while finance is fo-
Accounting is focused on allocating capital, while fi- cused on the fu-
nance is focused on bringing in capital. ture.
Accounting is about budgeting, saving, and borrow-
ing, while finance is about investing, forecasting, and
lending.
2. What is the main question that both individuals and Will the benefits
companies must consider when making financial de- of the action out-
cisions to reach a goal? weigh the costs?
Will the benefits of the action outweigh the costs?
Will this decision require debt or equity financing?
Will utility be maximized through this decision?
3. A financial manager at a company is trying to deter- Making financing
mine whether to issue new stocks or new bonds to decisions
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?
Making financing decisions
Making investment decisions
Managing interdepartmental loans
4. How can investing help a person reach personal finan- It provides access
cial goals? to potential rev-
It provides access to potential revenue or increases in enue or increases
value to help meet goals faster. in value to help
It ensures money is placed in a safe, risk-free, and meet goals faster.
easily accessible financial asset.
It helps a person understand how money was spent
previously in order to reliably predict future expenses.
5. A sign company is planning to have an initial public Primary market
offering (IPO). In which type of market will its stock
first be sold to the public?
Efficient market
, D076 Test Answers
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Secondary market
Money market
Primary market
6. Which type of economic indicator changes after the Lagging indicator
economy changes and helps identify trends in the
long term?
Yield curve indicator
Leading indicator
Coincident indicator
Lagging indicator
7. How does an investment institution, such as a mutual By providing indi-
fund, facilitate the circulation of money in the econo- viduals and firms
my? access to financial
By insuring deposits in investment accounts up to markets to buy or
$250,000 to promote public confidence sell financial secu-
By raising capital on a contractual basis, such as an rities
insurance contract
By providing individuals and firms access to financial
markets to buy or sell financial securities
8. Which type of economic indicator is used by govern- Leading indicator
ments and policymakers to implement or alter policies
in an effort to avoid or minimize the effects of an
economic downturn?
Correlated indicator
Coincident indicator
Lagging indicator
Leading indicator
9. What should a potential bondholder (lender) do to Set strict
prevent a company (borrower) from taking on risky covenants that the
projects? company cannot
Set strict covenants that the company cannot uphold uphold if it choos-
if it chooses a risky project es a risky project
Encourage manipulation of accounting procedures to
optimize the company's profit
Separate owners from management so their interests
do not conflict
Study online at https://quizlet.com/_fhymao
1. In which way is accounting different from finance? Accounting is
Accounting is backward looking, while finance is fo- backward looking,
cused on the future. while finance is fo-
Accounting is focused on allocating capital, while fi- cused on the fu-
nance is focused on bringing in capital. ture.
Accounting is about budgeting, saving, and borrow-
ing, while finance is about investing, forecasting, and
lending.
2. What is the main question that both individuals and Will the benefits
companies must consider when making financial de- of the action out-
cisions to reach a goal? weigh the costs?
Will the benefits of the action outweigh the costs?
Will this decision require debt or equity financing?
Will utility be maximized through this decision?
3. A financial manager at a company is trying to deter- Making financing
mine whether to issue new stocks or new bonds to decisions
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?
Making financing decisions
Making investment decisions
Managing interdepartmental loans
4. How can investing help a person reach personal finan- It provides access
cial goals? to potential rev-
It provides access to potential revenue or increases in enue or increases
value to help meet goals faster. in value to help
It ensures money is placed in a safe, risk-free, and meet goals faster.
easily accessible financial asset.
It helps a person understand how money was spent
previously in order to reliably predict future expenses.
5. A sign company is planning to have an initial public Primary market
offering (IPO). In which type of market will its stock
first be sold to the public?
Efficient market
, D076 Test Answers
Study online at https://quizlet.com/_fhymao
Secondary market
Money market
Primary market
6. Which type of economic indicator changes after the Lagging indicator
economy changes and helps identify trends in the
long term?
Yield curve indicator
Leading indicator
Coincident indicator
Lagging indicator
7. How does an investment institution, such as a mutual By providing indi-
fund, facilitate the circulation of money in the econo- viduals and firms
my? access to financial
By insuring deposits in investment accounts up to markets to buy or
$250,000 to promote public confidence sell financial secu-
By raising capital on a contractual basis, such as an rities
insurance contract
By providing individuals and firms access to financial
markets to buy or sell financial securities
8. Which type of economic indicator is used by govern- Leading indicator
ments and policymakers to implement or alter policies
in an effort to avoid or minimize the effects of an
economic downturn?
Correlated indicator
Coincident indicator
Lagging indicator
Leading indicator
9. What should a potential bondholder (lender) do to Set strict
prevent a company (borrower) from taking on risky covenants that the
projects? company cannot
Set strict covenants that the company cannot uphold uphold if it choos-
if it chooses a risky project es a risky project
Encourage manipulation of accounting procedures to
optimize the company's profit
Separate owners from management so their interests
do not conflict
