D076 FINANCE SKILLS FOR
MANAGERS WGU 100% ACCURATE
Real Return - ANSWERRate of growth in purchasing power of goods and services
Holding Period Return - ANSWERReturn over the entire period that an investor owns a
financial security
Beta - ANSWERA measure of the volatility, or systematic risk, of a security or a portfolio
in comparison to the market as a whole.
standard deviation - ANSWERUsed to measure the total risk of securities
annuity due - ANSWERan annuity whose payments occur at the beginning of each
period, consecutively
Par Bond - ANSWERWhen the bond's coupon rate equals the market yield;
Bonds are typically issued near par value
Pi - ANSWERProfitability index. At 1, the PI means a internal return rate equal to the
cost of capital
Irr - ANSWERInternal rate of return (IRR) is a discount rate at which the net present
value (NPV) of an investment is equal to zero.
If the IRR is higher than the cost of borrowing to fund the investment, the investment
should be profitable. Always shown as percentage.
Net Present Value (NPV) - ANSWERA method of ranking investment proposals using
the NPV, which is equal to the present value of the project's free cash flows discounted
at the cost of capital. Shown as dollar amount.. At $0 it means it will neither add nor
subtract value.
Inventory Turnover - ANSWERAn activity ratio found by COGS divided by inventory
dividends in arrears - ANSWERFeature of preferred stock specifying that if a company
ignores preferred stock dividends it cannot pay anything to it's common stockholders
Agency Problem - ANSWERthe possibility of conflict of interest between the owners and
management of a firm
Resolved by aligning interests, example giving shares to manangement
Operating Margin - ANSWERA profitability ratio found by EBIT profit divided by sales
, Capital Structure - ANSWERthe mixture of debt and equity maintained by a firm
Defensive Assets - ANSWERCompanies or securities with betas less than 1.
Variable Expenditure - ANSWERan expense that you have direct control over and that
can change from period to period
Price Risk - ANSWERPotential for the decline in the price of a financial security or an
asset relative to the market
efficient market - ANSWERa market in which prices fully reflect all the available
information about a specific security
trend analysis - ANSWERComparing a firms ratio across time
Coupon Yield - ANSWERThe stated interest rate of a bond; also known as coupon rate
syndicate - ANSWERa group of intermediaries that is used to oversee the issuance of
stocks and/or bonds
premium bond - ANSWERA bond whose price is above it's par value
Upside value - ANSWERThe unlimited earnings potential of equity ownership
Treasury Notes - ANSWERA note issued by the US government as a financial security
with a fixed interest rate and a short maturity between 1 and 10 years; abbreviated T-
note.
discount bond - ANSWERA bond whose price is below it's par value
Fixed Asset Turnover FAT - ANSWERAn activity ratio found by sales divided by fixed
assets
Fixed means property, plant and equipment.
Operating income Return on Investment (OIROI) - ANSWEROperating income (EBIT)
over total assets.
Before any finance or taxes.
Activity Ratios - ANSWERA category of ratios that measure how well a company uses
its assets to generate sales or cash, showing the firms operational efficiency and
profitability.
Example: AR ( accts receivable) turnover: credit sales over accounts receivable.
MANAGERS WGU 100% ACCURATE
Real Return - ANSWERRate of growth in purchasing power of goods and services
Holding Period Return - ANSWERReturn over the entire period that an investor owns a
financial security
Beta - ANSWERA measure of the volatility, or systematic risk, of a security or a portfolio
in comparison to the market as a whole.
standard deviation - ANSWERUsed to measure the total risk of securities
annuity due - ANSWERan annuity whose payments occur at the beginning of each
period, consecutively
Par Bond - ANSWERWhen the bond's coupon rate equals the market yield;
Bonds are typically issued near par value
Pi - ANSWERProfitability index. At 1, the PI means a internal return rate equal to the
cost of capital
Irr - ANSWERInternal rate of return (IRR) is a discount rate at which the net present
value (NPV) of an investment is equal to zero.
If the IRR is higher than the cost of borrowing to fund the investment, the investment
should be profitable. Always shown as percentage.
Net Present Value (NPV) - ANSWERA method of ranking investment proposals using
the NPV, which is equal to the present value of the project's free cash flows discounted
at the cost of capital. Shown as dollar amount.. At $0 it means it will neither add nor
subtract value.
Inventory Turnover - ANSWERAn activity ratio found by COGS divided by inventory
dividends in arrears - ANSWERFeature of preferred stock specifying that if a company
ignores preferred stock dividends it cannot pay anything to it's common stockholders
Agency Problem - ANSWERthe possibility of conflict of interest between the owners and
management of a firm
Resolved by aligning interests, example giving shares to manangement
Operating Margin - ANSWERA profitability ratio found by EBIT profit divided by sales
, Capital Structure - ANSWERthe mixture of debt and equity maintained by a firm
Defensive Assets - ANSWERCompanies or securities with betas less than 1.
Variable Expenditure - ANSWERan expense that you have direct control over and that
can change from period to period
Price Risk - ANSWERPotential for the decline in the price of a financial security or an
asset relative to the market
efficient market - ANSWERa market in which prices fully reflect all the available
information about a specific security
trend analysis - ANSWERComparing a firms ratio across time
Coupon Yield - ANSWERThe stated interest rate of a bond; also known as coupon rate
syndicate - ANSWERa group of intermediaries that is used to oversee the issuance of
stocks and/or bonds
premium bond - ANSWERA bond whose price is above it's par value
Upside value - ANSWERThe unlimited earnings potential of equity ownership
Treasury Notes - ANSWERA note issued by the US government as a financial security
with a fixed interest rate and a short maturity between 1 and 10 years; abbreviated T-
note.
discount bond - ANSWERA bond whose price is below it's par value
Fixed Asset Turnover FAT - ANSWERAn activity ratio found by sales divided by fixed
assets
Fixed means property, plant and equipment.
Operating income Return on Investment (OIROI) - ANSWEROperating income (EBIT)
over total assets.
Before any finance or taxes.
Activity Ratios - ANSWERA category of ratios that measure how well a company uses
its assets to generate sales or cash, showing the firms operational efficiency and
profitability.
Example: AR ( accts receivable) turnover: credit sales over accounts receivable.
