D775- INTRODUCTION TO BUSINESS
FINANCE EXAM GRADED A+
Accounts lReceivable l(A/R) lTurnover l- lcorrect lanswers l-A ltype lof lliquidity lratio lthat
ldescribes lthe lnumber lof ltimes la lfirm's laccounts lreceivable laccount lis lpaid loff.
lAccounts lReceivable lTurnover l= lCredit lSales l÷ lAccounts lReceivable.
Activity lRatios l- lcorrect lanswers l-A ltype lof lfinancial lratio lthat levaluates lhow
lefficiently la lfirm lutilizes lits lassets lto lgenerate lsales lor lrevenue; lalso lknown las
lefficiency lratios.
After-tax lCost lof lDebt l- lcorrect lanswers l-An ladjustment lof lthe lbefore-tax lcost lof ldebt
lthat lconsiders lthe ltax ldeductions lon linterest lexpenses. lIt lreflects lthe lactual lcost lto la
lfirm lfor ldebt lfinancing lafter lbenefiting lfrom ltax lbreaks.
, Agency lCosts l- lcorrect lanswers l-Costs lthat lare lincurred lby lthe lfirm lwhen
lmanagement land lemployees lof la lcompany ldo lnot lact lin lthe lbest linterests lof
lshareholders.
Agency lProblem l- lcorrect lanswers l-A lconflict lof linterest linherent lin lrelationships
lwhere lone lparty lis lexpected lto lact lin lanother's lbest linterests, lsuch las lbetween
lshareholders land lcompany lmanagement.
Annual lInterest lRate l- lcorrect lanswers l-The lannualized lcost lof lborrowing lor lthe
lyearly linterest lrate lcharged lon la lloan lor lcredit lbalance. lAlso lknown las lannual
lpercentage lrate l(APR).
Annuity l- lcorrect lanswers l-A lfinancial larrangement lin lwhich la lseries lof lequal
lpayments lis lmade lor lreceived lat lregular lintervals lover la lspecified lperiod lof ltime.
Assets l- lcorrect lanswers l-Resources lowned lby lthe lcompany lthat lhave leconomic
lvalue.
Auction lMarkets l- lcorrect lanswers l-Financial lmarkets lin lwhich lbuyers land lsellers
lsubmit lcompetitive lbids land loffers, lwith ltransactions loccurring lat lprices lthat lmatch
lthe lhighest lbid lwith lthe llowest loffer.
Average lCollection lPeriod l- lcorrect lanswers l-A ltype lof lliquidity lratio lthat lcalculates
lthe laverage lnumber lof ldays lit ltakes lfor la lcompany lto lcollect lits lreceivables.
lAverage lCollection lPeriod l= lAccounts lReceivable l÷ lDaily lCredit lSales.
Before-tax lCost lof lDebt l- lcorrect lanswers l-The linterest lrate lon lloans lor lbonds. lIf la
lbank lprovides lan linterest lrate lon la lsmall lbusiness lloan lof l9.5%, lthen l9.5% lis lthe
lbefore-tax lcost lof ldebt.
Balance lSheet l- lcorrect lanswers l-A lfinancial lstatement lthat lpresents la lcompany's
lfinancial lposition lat la lspecific lpoint lin ltime.
Bonds l- lcorrect lanswers l-Debt lsecurities lissued lby lcorporations lor lgovernments lto
lraise lcapital, lwhere lthe lissuer lagrees lto lpay lback lthe lprincipal lalong lwith linterest lon
lspecified ldates.
Book lValue l- lcorrect lanswers l-Literal lvalue lor lface lvalue.
Business lFinance l- lcorrect lanswers l-The larea lof lthe lbusiness lin lwhich l1) lfinancial
lmeasures lare lused lto lhelp lmanagement lmake ldecisions l(ratio lanalysis), l2) lfinancial
lanalysts luse lmathematical lmodels lto lselect lwhat lprojects lto linvest lin l(capital
lbudgeting), land l3) lfinancial lanalysts luse lthe lcost lof lcapital lto ldetermine lwhether
lthese lprojects lshould lbe lfinanced lwith leither ldebt lor lequity, land lwhich ltype lof leach.
FINANCE EXAM GRADED A+
Accounts lReceivable l(A/R) lTurnover l- lcorrect lanswers l-A ltype lof lliquidity lratio lthat
ldescribes lthe lnumber lof ltimes la lfirm's laccounts lreceivable laccount lis lpaid loff.
lAccounts lReceivable lTurnover l= lCredit lSales l÷ lAccounts lReceivable.
Activity lRatios l- lcorrect lanswers l-A ltype lof lfinancial lratio lthat levaluates lhow
lefficiently la lfirm lutilizes lits lassets lto lgenerate lsales lor lrevenue; lalso lknown las
lefficiency lratios.
After-tax lCost lof lDebt l- lcorrect lanswers l-An ladjustment lof lthe lbefore-tax lcost lof ldebt
lthat lconsiders lthe ltax ldeductions lon linterest lexpenses. lIt lreflects lthe lactual lcost lto la
lfirm lfor ldebt lfinancing lafter lbenefiting lfrom ltax lbreaks.
, Agency lCosts l- lcorrect lanswers l-Costs lthat lare lincurred lby lthe lfirm lwhen
lmanagement land lemployees lof la lcompany ldo lnot lact lin lthe lbest linterests lof
lshareholders.
Agency lProblem l- lcorrect lanswers l-A lconflict lof linterest linherent lin lrelationships
lwhere lone lparty lis lexpected lto lact lin lanother's lbest linterests, lsuch las lbetween
lshareholders land lcompany lmanagement.
Annual lInterest lRate l- lcorrect lanswers l-The lannualized lcost lof lborrowing lor lthe
lyearly linterest lrate lcharged lon la lloan lor lcredit lbalance. lAlso lknown las lannual
lpercentage lrate l(APR).
Annuity l- lcorrect lanswers l-A lfinancial larrangement lin lwhich la lseries lof lequal
lpayments lis lmade lor lreceived lat lregular lintervals lover la lspecified lperiod lof ltime.
Assets l- lcorrect lanswers l-Resources lowned lby lthe lcompany lthat lhave leconomic
lvalue.
Auction lMarkets l- lcorrect lanswers l-Financial lmarkets lin lwhich lbuyers land lsellers
lsubmit lcompetitive lbids land loffers, lwith ltransactions loccurring lat lprices lthat lmatch
lthe lhighest lbid lwith lthe llowest loffer.
Average lCollection lPeriod l- lcorrect lanswers l-A ltype lof lliquidity lratio lthat lcalculates
lthe laverage lnumber lof ldays lit ltakes lfor la lcompany lto lcollect lits lreceivables.
lAverage lCollection lPeriod l= lAccounts lReceivable l÷ lDaily lCredit lSales.
Before-tax lCost lof lDebt l- lcorrect lanswers l-The linterest lrate lon lloans lor lbonds. lIf la
lbank lprovides lan linterest lrate lon la lsmall lbusiness lloan lof l9.5%, lthen l9.5% lis lthe
lbefore-tax lcost lof ldebt.
Balance lSheet l- lcorrect lanswers l-A lfinancial lstatement lthat lpresents la lcompany's
lfinancial lposition lat la lspecific lpoint lin ltime.
Bonds l- lcorrect lanswers l-Debt lsecurities lissued lby lcorporations lor lgovernments lto
lraise lcapital, lwhere lthe lissuer lagrees lto lpay lback lthe lprincipal lalong lwith linterest lon
lspecified ldates.
Book lValue l- lcorrect lanswers l-Literal lvalue lor lface lvalue.
Business lFinance l- lcorrect lanswers l-The larea lof lthe lbusiness lin lwhich l1) lfinancial
lmeasures lare lused lto lhelp lmanagement lmake ldecisions l(ratio lanalysis), l2) lfinancial
lanalysts luse lmathematical lmodels lto lselect lwhat lprojects lto linvest lin l(capital
lbudgeting), land l3) lfinancial lanalysts luse lthe lcost lof lcapital lto ldetermine lwhether
lthese lprojects lshould lbe lfinanced lwith leither ldebt lor lequity, land lwhich ltype lof leach.
