WGU D076 Objective Assessment
Detailed Study Questions with
Verified Answers
1. Business finance - ANSWER Which area of finance deals with sources of
funding and the capital structure of corporations and seeks to increase the
value of a firm to its owners?
2. Finance focuses on the future, while accounting is generally backward-
looking. - ANSWER What is the primary difference between finance and
accounting?
3. Investments - ANSWER Which subspecialty of finance primarily involves
deciding which assets will create more wealth and earn positive returns?
4. Investments - ANSWER Area of finance that deals with investment
allocation and asset pricing.
5. Financial Institutions - ANSWER Area of finance that involves
organizations that accept deposits, offer investment products, loan money, or
broker financial transactions.
6. Corporate Finance. - ANSWER Area of finance that involves activities used
to increase shareholder wealth.
7. To maximize satisfaction from products purchased and services obtained -
ANSWER What is the primary aim of personal finance goals?
,8. Compounding Interest - ANSWER The interest on the principal plus the
interest on earned interest.
9. Corporate Bonds - ANSWER A debt instrument that is issued by a
corporation in order to raise capital.
10.Corporate Governance - ANSWER The system of rules, practices, and
processes by which a firm is directed and controlled.
11.Correlation - ANSWER The measure of the relationship between two
variables that move in relation to each other.
12.Cost of Capital - ANSWER The cost to a firm to use an investor's capital;
see interest rate.
13.Coupon Rate - ANSWER The stated interest rate of a bond; also known as
coupon yield.
14.Coupon Yield - ANSWER The stated interest rate of a bond; also known as
coupon rate.
15.Covenants - ANSWER Statements in a bond indenture that outline things
the company will obligate itself to do or not do in order to protect
bondholders.
16.Additional Funds Needed (AFN) - ANSWER Another name for the
discretionary financing needed or external financing needed. It represents
, the additional financing needed given a firm's expectations for future
growth.
17.Affirmative Covenants - ANSWER A bond covenant that describes things
the company pledges itself to do in order to protect bondholders.
18.Agency Costs - ANSWER Costs that are incurred when management does
not act in the best interest of shareholders.
19.Agency Problem - ANSWER When the agent (the management) does not
act in the best interest of the principal (the owners).
20.Aggressive Assets - ANSWER Companies or securities with beta greater
than 1.
21.Annual Percentage Rate - ANSWER The annual interest rate that is charged
for borrowing money or that is earned through investment.
22.Annuity - ANSWER A stream of cash flows of an equal amount paid every
consecutive period.
23.Annuity Due - ANSWER A series of equal payments made at the beginning
of consecutive periods.
24.Asset Pricing - ANSWER The process of valuing assets.
25.Auction Market - ANSWER A secondary market with a physical location
and where prices are determined by investors' willingness to pay.
, 26.Average Collection Period (ACP) - ANSWER. Activity ratio found by the
number of days in a year (365) divided by AR turnover.
27.Balance Sheet Forecasting - ANSWER Using sales growth and the profit
forecast to construct a pro forma balance sheet to understand the future
implications of the sources and uses of finances.
28.Banks and Credit Unions - ANSWER Receive deposits and extend loans to
individuals and businesses.
29.Benchmarking - ANSWER The process of completing a financial analysis
to compare a firm's financial performance to that of other similar firms.
30.Beta - ANSWER A variable that describes how the price of a security varies
with the market.
31.Bid-ask Spread - ANSWER The difference between the bid and ask prices
that compensate the specialist for the risk that he or she bears for willingness
to provide liquidity.
32.Board of Directors - ANSWER A group of people who jointly supervise the
activities of an organization.
33.Bond Indenture - ANSWER A legal contract that governs the relationship
between a firm and its bondholders.
34.Bondholders - ANSWER A person who loans a corporation money by
buying debt securities.
Detailed Study Questions with
Verified Answers
1. Business finance - ANSWER Which area of finance deals with sources of
funding and the capital structure of corporations and seeks to increase the
value of a firm to its owners?
2. Finance focuses on the future, while accounting is generally backward-
looking. - ANSWER What is the primary difference between finance and
accounting?
3. Investments - ANSWER Which subspecialty of finance primarily involves
deciding which assets will create more wealth and earn positive returns?
4. Investments - ANSWER Area of finance that deals with investment
allocation and asset pricing.
5. Financial Institutions - ANSWER Area of finance that involves
organizations that accept deposits, offer investment products, loan money, or
broker financial transactions.
6. Corporate Finance. - ANSWER Area of finance that involves activities used
to increase shareholder wealth.
7. To maximize satisfaction from products purchased and services obtained -
ANSWER What is the primary aim of personal finance goals?
,8. Compounding Interest - ANSWER The interest on the principal plus the
interest on earned interest.
9. Corporate Bonds - ANSWER A debt instrument that is issued by a
corporation in order to raise capital.
10.Corporate Governance - ANSWER The system of rules, practices, and
processes by which a firm is directed and controlled.
11.Correlation - ANSWER The measure of the relationship between two
variables that move in relation to each other.
12.Cost of Capital - ANSWER The cost to a firm to use an investor's capital;
see interest rate.
13.Coupon Rate - ANSWER The stated interest rate of a bond; also known as
coupon yield.
14.Coupon Yield - ANSWER The stated interest rate of a bond; also known as
coupon rate.
15.Covenants - ANSWER Statements in a bond indenture that outline things
the company will obligate itself to do or not do in order to protect
bondholders.
16.Additional Funds Needed (AFN) - ANSWER Another name for the
discretionary financing needed or external financing needed. It represents
, the additional financing needed given a firm's expectations for future
growth.
17.Affirmative Covenants - ANSWER A bond covenant that describes things
the company pledges itself to do in order to protect bondholders.
18.Agency Costs - ANSWER Costs that are incurred when management does
not act in the best interest of shareholders.
19.Agency Problem - ANSWER When the agent (the management) does not
act in the best interest of the principal (the owners).
20.Aggressive Assets - ANSWER Companies or securities with beta greater
than 1.
21.Annual Percentage Rate - ANSWER The annual interest rate that is charged
for borrowing money or that is earned through investment.
22.Annuity - ANSWER A stream of cash flows of an equal amount paid every
consecutive period.
23.Annuity Due - ANSWER A series of equal payments made at the beginning
of consecutive periods.
24.Asset Pricing - ANSWER The process of valuing assets.
25.Auction Market - ANSWER A secondary market with a physical location
and where prices are determined by investors' willingness to pay.
, 26.Average Collection Period (ACP) - ANSWER. Activity ratio found by the
number of days in a year (365) divided by AR turnover.
27.Balance Sheet Forecasting - ANSWER Using sales growth and the profit
forecast to construct a pro forma balance sheet to understand the future
implications of the sources and uses of finances.
28.Banks and Credit Unions - ANSWER Receive deposits and extend loans to
individuals and businesses.
29.Benchmarking - ANSWER The process of completing a financial analysis
to compare a firm's financial performance to that of other similar firms.
30.Beta - ANSWER A variable that describes how the price of a security varies
with the market.
31.Bid-ask Spread - ANSWER The difference between the bid and ask prices
that compensate the specialist for the risk that he or she bears for willingness
to provide liquidity.
32.Board of Directors - ANSWER A group of people who jointly supervise the
activities of an organization.
33.Bond Indenture - ANSWER A legal contract that governs the relationship
between a firm and its bondholders.
34.Bondholders - ANSWER A person who loans a corporation money by
buying debt securities.
