1
D775 Business Finance - PA Test #1
70 Questions and Answers (100%
Correct Answers) Already Graded A+
Which principle guides business finance to
optimize resource use? Ans: Risk-return trade-
off
© 2025 Assignment
Which activity describes capital raising in
Guru01 - Stuvia
business finance? Ans: Securing funding for
business operations and projects
Expert
Which finance activity involves the creation,
circulation, and management of money? Ans:
Setting monetary policy
What is common stock? Ans: A share of
ownership in a firm with voting rights
What is a characteristic of preferred stock? Ans:
Fixed dividends
What is the purpose of bonds from the
perspective of issuers? Ans: To raise capital
without diluting ownership
Which type of bonds are considered junk bonds?
Ans: Speculative bonds
, 2
Which type of investment vehicle is uniquely
used for retirement savings? Ans: 401k plans
What is true about options in financial
derivatives? Ans: They give the buyer the right,
but not the obligation, to buy or sell an asset.
How do funds benefit from economies of scale?
Ans: By making large-scale investments that
© 2025 Assignment
reduce transaction costs
Guru01 - Stuvia
What is an initial public offering (IPO)? Ans: The
Expert
first sale of a company's stock to the public
What is an example of a secondary market
activity? Ans: The trading of stocks on the New
York Stock Exchange
What are the two main types of financial markets
based on their functions? Ans: Primary markets
and secondary markets
What is a role of financial regulators? Ans:
Ensuring fair and transparent markets
What are depository institutions? Ans:
Institutions that accept deposits and provide
loans
, 3
What is the primary source of revenue for
depository institutions? Ans: Interest income
from loans
How does rising Consumer Price Index (CPI)
affect businesses? Ans: It indicates increased
costs for raw materials and labor.
How can companies demonstrate a commitment
© 2025 Assignment
to corporate social responsibility (CSR)? Ans:
Guru01 - Stuvia
Supporting education and healthcare initiatives
Expert
What is the impact of integrating environmental,
social, and governance (ESG) criteria into
investment decisions? Ans: Promoting
sustainable and ethical practices
Which role do ethical considerations play in
addressing agency problems? Ans: Aligning
managers' goals with shareholders' interests
What is the purpose of using financial ratios for
investors? Ans: To evaluate the company's
potential for return on investment
How do financial ratios help in comparing
companies? Ans: By providing a standardized
basis for performance evaluation
D775 Business Finance - PA Test #1
70 Questions and Answers (100%
Correct Answers) Already Graded A+
Which principle guides business finance to
optimize resource use? Ans: Risk-return trade-
off
© 2025 Assignment
Which activity describes capital raising in
Guru01 - Stuvia
business finance? Ans: Securing funding for
business operations and projects
Expert
Which finance activity involves the creation,
circulation, and management of money? Ans:
Setting monetary policy
What is common stock? Ans: A share of
ownership in a firm with voting rights
What is a characteristic of preferred stock? Ans:
Fixed dividends
What is the purpose of bonds from the
perspective of issuers? Ans: To raise capital
without diluting ownership
Which type of bonds are considered junk bonds?
Ans: Speculative bonds
, 2
Which type of investment vehicle is uniquely
used for retirement savings? Ans: 401k plans
What is true about options in financial
derivatives? Ans: They give the buyer the right,
but not the obligation, to buy or sell an asset.
How do funds benefit from economies of scale?
Ans: By making large-scale investments that
© 2025 Assignment
reduce transaction costs
Guru01 - Stuvia
What is an initial public offering (IPO)? Ans: The
Expert
first sale of a company's stock to the public
What is an example of a secondary market
activity? Ans: The trading of stocks on the New
York Stock Exchange
What are the two main types of financial markets
based on their functions? Ans: Primary markets
and secondary markets
What is a role of financial regulators? Ans:
Ensuring fair and transparent markets
What are depository institutions? Ans:
Institutions that accept deposits and provide
loans
, 3
What is the primary source of revenue for
depository institutions? Ans: Interest income
from loans
How does rising Consumer Price Index (CPI)
affect businesses? Ans: It indicates increased
costs for raw materials and labor.
How can companies demonstrate a commitment
© 2025 Assignment
to corporate social responsibility (CSR)? Ans:
Guru01 - Stuvia
Supporting education and healthcare initiatives
Expert
What is the impact of integrating environmental,
social, and governance (ESG) criteria into
investment decisions? Ans: Promoting
sustainable and ethical practices
Which role do ethical considerations play in
addressing agency problems? Ans: Aligning
managers' goals with shareholders' interests
What is the purpose of using financial ratios for
investors? Ans: To evaluate the company's
potential for return on investment
How do financial ratios help in comparing
companies? Ans: By providing a standardized
basis for performance evaluation
