WGU C201 Business Acumen Study Guide
questions with verified answers
A financial plan is a document that specifies the funds needed by a company for a
given period of time, the timing of inflows and outflows, and the most
appropriate sources and uses of funds. The financial plan addresses three
questions: Ans✓✓✓ What funds will be required during the planning period?
When will funds be needed? Where will funds be obtained? Three steps are
involved in the financial planning process: forecasting sales over a future period of
time, estimating the
the expected level of profits over the planning period, and determining the
additional assets needed to support additional sales.
Assets consist of what a company owns and also comprise the uses of its funds.
Sound financial management requires assets to be acquired and managed as
effectively and efficiently as possible. The major current assets are cash,
marketable securities, accounts receivable, and inventory. The goal of cash
management is to have sufficient funds on hand to meet day-to-day transactions
and pay any unexpected expenses Ans✓✓✓ Excess cash should be invested in
marketable
securities, which are low-risk securities with short maturities. Managing accounts
receivable, which are uncollected
credit sales, involves securing funds owed the company as quickly as possible
while offering sufficient credit to customers
to generate increased sales.
Businesses have two sources of funds: debt capital and equity capital. Debt capital
consists of funds obtained through borrowing, and equity capital consists of funds
provided by the company's owners. The mix of debt and equity capital is known
as the company's capital structure, and the financial manager's job is to find the
proper mix. Ans✓✓✓ Leverage is a technique of increasing the rate of return on
, funds invested by borrowing. However, leverage increases risk. Also, overreliance
on borrowed funds may reduce management's flexibility in future financing
decisions. Equity capital also has drawbacks. When additional equity capital is
sold, the control of existing shareholders is diluted
Commercial paper is a short-term IOU sold by a company. Although large
amounts of money can be raised through the sale of commercial paper, usually at
rates below those charged by banks, access to the
commercial- the paper market is limited to large, financially strong corporations.
Ans✓✓✓
Define synergy. Ans✓✓✓ the term used to describe the benefits produced by a
merger or acquisition. It is the notion that the combined company is worth more
than the buyer and the target are individually.
Describe venture capitalists Ans✓✓✓ Venture capitalists raise money from
wealthy individuals and institutional investors and invest the funds in promising
companies. If the business succeeds, venture capitalists can earn substantial
profits.
Explain the concept of leverage. Ans✓✓✓ Leverage is a technique of increasing
the rate of return on funds invested by borrowing funds. However, leverage also
increases risk
Explain the difference between an expansion decision and a replacement
decision. Ans✓✓✓ An expansion decision involves choosing between offering
new products or building or acquiring new production facilities. A replacement
decision is one that considers whether to replace an existing asset with a new one
considers
questions with verified answers
A financial plan is a document that specifies the funds needed by a company for a
given period of time, the timing of inflows and outflows, and the most
appropriate sources and uses of funds. The financial plan addresses three
questions: Ans✓✓✓ What funds will be required during the planning period?
When will funds be needed? Where will funds be obtained? Three steps are
involved in the financial planning process: forecasting sales over a future period of
time, estimating the
the expected level of profits over the planning period, and determining the
additional assets needed to support additional sales.
Assets consist of what a company owns and also comprise the uses of its funds.
Sound financial management requires assets to be acquired and managed as
effectively and efficiently as possible. The major current assets are cash,
marketable securities, accounts receivable, and inventory. The goal of cash
management is to have sufficient funds on hand to meet day-to-day transactions
and pay any unexpected expenses Ans✓✓✓ Excess cash should be invested in
marketable
securities, which are low-risk securities with short maturities. Managing accounts
receivable, which are uncollected
credit sales, involves securing funds owed the company as quickly as possible
while offering sufficient credit to customers
to generate increased sales.
Businesses have two sources of funds: debt capital and equity capital. Debt capital
consists of funds obtained through borrowing, and equity capital consists of funds
provided by the company's owners. The mix of debt and equity capital is known
as the company's capital structure, and the financial manager's job is to find the
proper mix. Ans✓✓✓ Leverage is a technique of increasing the rate of return on
, funds invested by borrowing. However, leverage increases risk. Also, overreliance
on borrowed funds may reduce management's flexibility in future financing
decisions. Equity capital also has drawbacks. When additional equity capital is
sold, the control of existing shareholders is diluted
Commercial paper is a short-term IOU sold by a company. Although large
amounts of money can be raised through the sale of commercial paper, usually at
rates below those charged by banks, access to the
commercial- the paper market is limited to large, financially strong corporations.
Ans✓✓✓
Define synergy. Ans✓✓✓ the term used to describe the benefits produced by a
merger or acquisition. It is the notion that the combined company is worth more
than the buyer and the target are individually.
Describe venture capitalists Ans✓✓✓ Venture capitalists raise money from
wealthy individuals and institutional investors and invest the funds in promising
companies. If the business succeeds, venture capitalists can earn substantial
profits.
Explain the concept of leverage. Ans✓✓✓ Leverage is a technique of increasing
the rate of return on funds invested by borrowing funds. However, leverage also
increases risk
Explain the difference between an expansion decision and a replacement
decision. Ans✓✓✓ An expansion decision involves choosing between offering
new products or building or acquiring new production facilities. A replacement
decision is one that considers whether to replace an existing asset with a new one
considers
