D775- Introduction to business finance
Questions with 100% Correct Answers
Accounts Receivable (A/R) Turnover Correct Answer: A
type of liquidity ratio that describes the number of times
a firm's accounts receivable account is paid off.
Accounts Receivable Turnover = Credit Sales ÷ Accounts
Receivable.
Activity Ratios Correct Answer: A type of financial ratio
that evaluates how efficiently a firm utilizes its assets to
generate sales or revenue; also known as efficiency
ratios.
After-tax Cost of Debt Correct Answer: An adjustment of
the before-tax cost of debt that considers the tax
deductions on interest expenses. It reflects the actual
cost to a firm for debt financing after benefiting from tax
breaks.
Agency Costs Correct Answer: Costs that are incurred
by the firm when management and employees of a
company do not act in the best interests of
shareholders.
,Agency Problem Correct Answer: A conflict of interest
inherent in relationships where one party is expected to
act in another's best interests, such as between
shareholders and company management.
Annual Interest Rate Correct Answer: The annualized
cost of borrowing or the yearly interest rate charged on
a loan or credit balance. Also known as annual
percentage rate (APR).
Annuity Correct Answer: A financial arrangement in
which a series of equal payments is made or received at
regular intervals over a specified period of time.
Assets Correct Answer: Resources owned by the
company that have economic value.
Auction Markets Correct Answer: Financial markets in
which buyers and sellers submit competitive bids and
offers, with transactions occurring at prices that match
the highest bid with the lowest offer.
Average Collection Period Correct Answer: A type of
liquidity ratio that calculates the average number of
days it takes for a company to collect its receivables.
, Average Collection Period = Accounts Receivable ÷
Daily Credit Sales.
Before-tax Cost of Debt Correct Answer: The interest rate
on loans or bonds. If a bank provides an interest rate on
a small business loan of 9.5%, then 9.5% is the before-tax
cost of debt.
Balance Sheet Correct Answer: A financial statement
that presents a company's financial position at a
specific point in time.
Bonds Correct Answer: Debt securities issued by
corporations or governments to raise capital, where the
issuer agrees to pay back the principal along with
interest on specified dates.
Book Value Correct Answer: Literal value or face value.
Business Finance Correct Answer: The area of the
business in which 1) financial measures are used to help
management make decisions (ratio analysis), 2)
financial analysts use mathematical models to select
what projects to invest in (capital budgeting), and 3)
financial analysts use the cost of capital to determine
Questions with 100% Correct Answers
Accounts Receivable (A/R) Turnover Correct Answer: A
type of liquidity ratio that describes the number of times
a firm's accounts receivable account is paid off.
Accounts Receivable Turnover = Credit Sales ÷ Accounts
Receivable.
Activity Ratios Correct Answer: A type of financial ratio
that evaluates how efficiently a firm utilizes its assets to
generate sales or revenue; also known as efficiency
ratios.
After-tax Cost of Debt Correct Answer: An adjustment of
the before-tax cost of debt that considers the tax
deductions on interest expenses. It reflects the actual
cost to a firm for debt financing after benefiting from tax
breaks.
Agency Costs Correct Answer: Costs that are incurred
by the firm when management and employees of a
company do not act in the best interests of
shareholders.
,Agency Problem Correct Answer: A conflict of interest
inherent in relationships where one party is expected to
act in another's best interests, such as between
shareholders and company management.
Annual Interest Rate Correct Answer: The annualized
cost of borrowing or the yearly interest rate charged on
a loan or credit balance. Also known as annual
percentage rate (APR).
Annuity Correct Answer: A financial arrangement in
which a series of equal payments is made or received at
regular intervals over a specified period of time.
Assets Correct Answer: Resources owned by the
company that have economic value.
Auction Markets Correct Answer: Financial markets in
which buyers and sellers submit competitive bids and
offers, with transactions occurring at prices that match
the highest bid with the lowest offer.
Average Collection Period Correct Answer: A type of
liquidity ratio that calculates the average number of
days it takes for a company to collect its receivables.
, Average Collection Period = Accounts Receivable ÷
Daily Credit Sales.
Before-tax Cost of Debt Correct Answer: The interest rate
on loans or bonds. If a bank provides an interest rate on
a small business loan of 9.5%, then 9.5% is the before-tax
cost of debt.
Balance Sheet Correct Answer: A financial statement
that presents a company's financial position at a
specific point in time.
Bonds Correct Answer: Debt securities issued by
corporations or governments to raise capital, where the
issuer agrees to pay back the principal along with
interest on specified dates.
Book Value Correct Answer: Literal value or face value.
Business Finance Correct Answer: The area of the
business in which 1) financial measures are used to help
management make decisions (ratio analysis), 2)
financial analysts use mathematical models to select
what projects to invest in (capital budgeting), and 3)
financial analysts use the cost of capital to determine
