D076 OA |Questions and Answers
1. What does the term legal describe?
Encourage manipulation of accounting procedures to optimize the company's profit
Release managers who do not attempt to maximize immediate shareholder value
Set strict covenants that the company cannot uphold if it chooses a risky project
An action that is in accordance with the laws and rules set by an authority.: An action that is in accordance with the
laws and rules set by an authority.
2. What does high inventory turnover relative to the industry and competitors indicate?
Models are required by the SEC when a firm plans to issue additional stock on the public market.
The firm holds too much inventory and its successful selling its good and services.
Models allow users to see the complex relationships between sales and other aspects of the business.
The firm does not hold enough inventory and is making its customers wait longer to receive their purchased
goods.: The firm does not hold enough inven- tory and is making its customers wait longer to receive their purchased
goods.
3. What is the ratio that tells you on average how long it takes for a firm to collect accounts receivable.
Average Benchmarking Opportunity
cost Average collection period
Leading indicator: Average collection period
4. Three different names are used for interest rate for different purposes and perspectives:
Discount rate, required rate, and cost of capital. Required rate, correlated
indicator, opportunity cost Cost of capital, interest rate, and renew rate
required rate, discount method, cost of interest: Discount rate, required rate, and cost of capital.
5. What is the main purpose of charging interest?
, D076 OA |Questions and Answers
interest can be a good tool because it summarizes the required return, but it is a detriment because it requires a
larger cost of capital.
The higher risk an investor takes, the higher return the investor expects to receive.
Compounding interest can be a good tool to understand the time value of money, but it is a detriment because it
does not take inflation into account. It allows borrowers to pay to use the assets of another entity to accomplish
their own goals.: It allows borrowers to pay to use the assets of another entity to accomplish their own goals.
6. The required rate of return is also known as the BLANK in the context of corporate finance.
Inflation Hurdle
rate
Opportunity cost Risk:
Hurdle rate.
7. The BLANK is the rate of return or compensation that an investor or lender will accept for investments such
as stocks, bonds, or loans.
Hurdle rate Inflation
Opportunity cost
Required rate of return: Required rate of return
8. BLANK Is the possibility that the realized or actual return will differ from the expected return?
Hurdle rate. Inflation
Opportunity cost Risk:
Risk
9. Which components of an interest rate is an indicator of inflation and oppor- tunity cost?
Capital growth rate Risk-free rate
Sustainable growth rate
Sales growth rate: Risk-free rate
10.What is the name for the interest rate expressed on an annual basis?
, D076 OA |Questions and Answers
Sustainable growth rate Historical
regression Annual percentage rate
Annual Percent of sales: Annual percentage rate
11.Why is the required rate of return also known as the hurdle rate?
It is simple and helps ensure that users do not spend more than the cash that they have available.
It is the minimum rate that a firm must surpass to accept a project.
It enables users to connect bank and credit card accounts to automatically update income and expenses.
It is the maximum rate that a firm must surpass to deny a project.: It is the minimum rate that a firm must surpass to
accept a project.
12. You want to buy a house, so you obtain a mortgage for which you can afford the monthly mortgage
payment. What process have you engaged in as part of your financial decision making?
Profit turnover
Gross margin
Financing
Accounts receivable turnover: Financing
13.What area of finance involves deciding which assets to invest in to create wealth in the future?
Financial forecasting Ratio analysis
Accounting Investments:
Investments
14.Hannah is the financial manager. A project approved and will cost $5mil- lion. Since the company does not
have enough cash on reserve, she must figure out how to raise enough money to start the project. She can choose
bonds, new stocks, a mortgage loan, or some combo. What task is Hannah performing in this scenario?
Making financing decisions Managing working
capital Making investment decisions
Managing interdepartmental loans: Making a financing decision
1. What does the term legal describe?
Encourage manipulation of accounting procedures to optimize the company's profit
Release managers who do not attempt to maximize immediate shareholder value
Set strict covenants that the company cannot uphold if it chooses a risky project
An action that is in accordance with the laws and rules set by an authority.: An action that is in accordance with the
laws and rules set by an authority.
2. What does high inventory turnover relative to the industry and competitors indicate?
Models are required by the SEC when a firm plans to issue additional stock on the public market.
The firm holds too much inventory and its successful selling its good and services.
Models allow users to see the complex relationships between sales and other aspects of the business.
The firm does not hold enough inventory and is making its customers wait longer to receive their purchased
goods.: The firm does not hold enough inven- tory and is making its customers wait longer to receive their purchased
goods.
3. What is the ratio that tells you on average how long it takes for a firm to collect accounts receivable.
Average Benchmarking Opportunity
cost Average collection period
Leading indicator: Average collection period
4. Three different names are used for interest rate for different purposes and perspectives:
Discount rate, required rate, and cost of capital. Required rate, correlated
indicator, opportunity cost Cost of capital, interest rate, and renew rate
required rate, discount method, cost of interest: Discount rate, required rate, and cost of capital.
5. What is the main purpose of charging interest?
, D076 OA |Questions and Answers
interest can be a good tool because it summarizes the required return, but it is a detriment because it requires a
larger cost of capital.
The higher risk an investor takes, the higher return the investor expects to receive.
Compounding interest can be a good tool to understand the time value of money, but it is a detriment because it
does not take inflation into account. It allows borrowers to pay to use the assets of another entity to accomplish
their own goals.: It allows borrowers to pay to use the assets of another entity to accomplish their own goals.
6. The required rate of return is also known as the BLANK in the context of corporate finance.
Inflation Hurdle
rate
Opportunity cost Risk:
Hurdle rate.
7. The BLANK is the rate of return or compensation that an investor or lender will accept for investments such
as stocks, bonds, or loans.
Hurdle rate Inflation
Opportunity cost
Required rate of return: Required rate of return
8. BLANK Is the possibility that the realized or actual return will differ from the expected return?
Hurdle rate. Inflation
Opportunity cost Risk:
Risk
9. Which components of an interest rate is an indicator of inflation and oppor- tunity cost?
Capital growth rate Risk-free rate
Sustainable growth rate
Sales growth rate: Risk-free rate
10.What is the name for the interest rate expressed on an annual basis?
, D076 OA |Questions and Answers
Sustainable growth rate Historical
regression Annual percentage rate
Annual Percent of sales: Annual percentage rate
11.Why is the required rate of return also known as the hurdle rate?
It is simple and helps ensure that users do not spend more than the cash that they have available.
It is the minimum rate that a firm must surpass to accept a project.
It enables users to connect bank and credit card accounts to automatically update income and expenses.
It is the maximum rate that a firm must surpass to deny a project.: It is the minimum rate that a firm must surpass to
accept a project.
12. You want to buy a house, so you obtain a mortgage for which you can afford the monthly mortgage
payment. What process have you engaged in as part of your financial decision making?
Profit turnover
Gross margin
Financing
Accounts receivable turnover: Financing
13.What area of finance involves deciding which assets to invest in to create wealth in the future?
Financial forecasting Ratio analysis
Accounting Investments:
Investments
14.Hannah is the financial manager. A project approved and will cost $5mil- lion. Since the company does not
have enough cash on reserve, she must figure out how to raise enough money to start the project. She can choose
bonds, new stocks, a mortgage loan, or some combo. What task is Hannah performing in this scenario?
Making financing decisions Managing working
capital Making investment decisions
Managing interdepartmental loans: Making a financing decision
